It may feel like it's harder than ever to even consider the possibility of buying a home, particularly when you have limited income or past issues with credit. But there is a path to getting Mortgage-Ready if you are prepared to put in the time and work to begin the journey.
The journey involves a close examination of your finances, educating yourself by attending events on this topic, doing research on government and other programs to see if you qualify for their aid, and identifying the financial institutions to help you. It may not be easy, but the hard work just might help you achieve what was seemingly impossible – the ability to buy your own home.
"So many people live paycheck to paycheck because of paying high rents and other costs, and they just don't have the extra money to save," said Vanessa Owens, a Community Mortgage Sales Manager with TD Bank in Calverton, Maryland. "But there are resources and outlets to help people purchase homes. There is a silver lining out there."
What is Mortgage-Ready?
Being Mortgage-Ready basically means you're financially prepared and meet the qualifications to obtain a mortgage from a lender to purchase a home, according to Vanessa.
"It involves having good credit, stable income which impacts debt-to-income ratios, and enough savings for down payment and closing costs," Vanessa said. "The first step to getting Mortgage-Ready is to understand your finances and create a budget. You need to know what your expenses, your debts and your savings are."
While it can be cumbersome to list all your monthly income and expenditures, by doing so, you can see what you can afford, and also know what expenses you may be able to curtail, such as going out for meals or buying too many things you wind up not using. It gives you the power to make the best financial decisions by knowing your true financial health.
One of the most important aspects of knowing your finances is reviewing your credit report . There may be errors in your credit report that you do not know about that can hurt your ability to get a loan. So, start looking into this early. It could take up to six months to have corrections made. "Make sure you get anything off of your credit report that is incorrect," said Mandy Kelso, TD Bank's Head of Financial Education. "It's worth the time you invest to fix errors on your credit report."
Federal law allows you to get a free copy of your credit report every twelve months from each credit reporting company. More information can be found at annualcreditreport.com.
The Federal Trade Commission offers detailed suggestions on how to fix errors if you do identify them.
In addition, your credit score is a number based on your credit report information and is used by lenders to predict how likely you are to pay back a loan on time.
Attend events to learn more
There are many workshops and seminars, including some offered by TD Bank, for people interested in learning how to buy a home. They can be geared toward a first-time homebuyer or someone who has purchased homes previously. It's a great way to learn about what you need to get a mortgage and an opportunity to address professionals who can help answer specific questions you may have.
Both Vanessa and Mandy note that they often see people at these seminars who don't believe they will be able to buy a home in their lifetime. They note that if a person is not Mortgage-Ready, some financial institutions will work with them to help get them to that stage.
Others may benefit from a referral to a housing counseling agency which can directly help people learn how to budget. Housing counselors are certified by the government through HUD (Department of Housing and Urban Development) and can aid people in assessing financial situations and evaluating options.
Extensive online resources about government programs
Vanessa and Mandy suggest that people who want to get Mortgage-Ready should extensively review online resources that provide a lot of information. They note that the TD Bank Learning Center has many learning modules dedicated to the topic of home lending.
The U.S. Department of Housing and Urban Development also has substantial resources about buying a home. And you can search by state to find first-time homebuyer and homebuying assistance programs to support your homebuying journey.
Both Vanessa and Mandy encourage people to learn about the various programs that may help them attain the dream of home ownership.
"I tell anyone, if you're looking to purchase a home, reach out and start that journey now," Vanessa said. "If you're not ready now, let's see what you need to do to become ready. Don't get discouraged, there are a lot of resources out there that can help someone purchase a home."