If your income is relatively low and you’re considering getting a mortgage, you may be wondering what options are available to you. Luckily, there are many options available for people with good credit. Remember, the most important thing is to make sure that you borrow within your means. With that said, here are 3 tips to help low-income home buyers get a good mortgage rate:
1. Find a home that you can afford
If you choose a home that you can afford comfortably and have a good credit score, your rates are likely to be reasonable. If you try to purchase a home a bit outside your budget, you’re likely to face higher interest rates and monthly payments. Especially, if you have bad credit. When purchasing with low-income, your new home can be a starter home and an opportunity to build your credit. This is a great way to prepare for a second home purchase and buy that dream home. Right now, pick an affordable home and use it as a tool to build on financially.
2. Be careful with adjustable-rate mortgages
Adjustable-rate home loans allow low-income home buyers to afford a more expensive home initially. However, getting one can backfire in the long run. You’re probably asking yourself, “Why would this backfire?”. It’s because the interest rates of these mortgages will usually increase. As a result, your monthly payments will go up over time. This can make it more difficult to afford the payments each month. Not only could this result in foreclosure, but it could lead to damage to your credit score. This will make it more difficult to get new loans in the future.
3. Large Down Payments
The amount that you need to borrow is the biggest factor being considered when applying for a mortgage. If you’re able to afford a significant down payment, use this to reduce the amount that you need to borrow. The larger the down payment, the less money you’ll need to borrow and the better rate you can receive from a lender. While your income may be low and it might be tough to save, we put together five budget tips to help you save for a home mortgage.
Buying a home with a low income is not impossible. Lenders will always exam your financial profile and if you have good employment history, good credit, and a downpayment ready, you should be able to keep your mortgage interest rate low.
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