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Five keys to help you prepare to unlock the door to a new home

January 07, 2013
Interest rates remain at historic lows. Yet, many local buyers are sitting on the fence, unsure whether now is the right time to buy a home in Henderson—and if they even can qualify for a loan.

There's no magic bullet to get you the loan you want, but there are few things you can do to help get you on the right path. Below are some helpful tips to make you look your best in the eyes of a lender:

Decrease your debt

An important factor that lenders look at when qualifying borrowers is their debt-to-income ratio. This is the relationship between your income and expenses; the amount of debt a person carries compared to how much income they bring in.

The smaller your debt-to-income ratio is, the more attractive you are as a borrower. While debt-to-income requirements vary by mortgage programs, a good rule of thumb is to keep your total debt level at or below 36 percent of your gross monthly income.

Save for a down payment

In the current mortgage environment, borrowers need to have a down payment. Having 20 percent down is not a must, but it will help get the best interest rate available and help you avoid private mortgage insurance.

If you need help coming up with a down payment, try to find a down payment assistance program that might be able to assist you. Nonprofit organizations, such as Neighborhood Housing Services of Southern Nevada, may have up to $15,000 in down payment assistance available for qualified homebuyers.

Check your credit

Know where your credit stands before you apply for a loan. A borrower's credit history can impact the amount required for a down payment, the interest rate or the amount of money able to be borrowed in relation to that individual's income.

Banks in Henderson price competitively and lend across the credit spectrum but having a credit score of 720 or above is not only going to help you look better to a lender for loan approval, it also may help you get a better interest rate.

Once per year, you are able to obtain a free copy of your credit report from each of the three credit bureaus by visiting annualcreditreport.com. In addition to viewing your report, you also may want to consider getting your credit score, which may include a small fee.

Show proof of all income

Can you repay the loan? That's what lenders want to know when they consider your application. You must be able to verify a stable source of income. Lenders will review your employment history and will require current W2s or tax returns if you are self-employed. If you have any other income, you should bring proof to share with the lender.

Have some money in the bank

In addition to being able to show you can make your monthly mortgage payments and other responsibilities, lenders want to know that you have cash reserves. Some of us call this cushion a "rainy day fund," which is to handle those unexpected expenses that come with homeownership, such as repairs.

Taking just a few steps today can get you closer toward your dream of owning your own home.

Sandy Streator is the Nevada retail regional Sales Manager for Wells Fargo Home Mortgage.

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