Even though love may be blind, it’s important to go into home buying with your eyes open. That could mean that you need to pop some questions about money as soon as possible. Couples often go house hunting first before they even think about a mortgage, which is like getting married before the first date. Talking about money with your partner can be uncomfortable, however, it is important because your finances may be in order but if your partners aren’t, that could jeopardize your chances of homeownership. When a couple wants to purchase a home together, lenders will assess the couple’s ability to purchase jointly. Meaning one person’s credit or income could affect the couple’s ability to qualify for a mortgage at all. So, before you start going to open houses, make sure to ask these questions!

How much debt do you have?

Odds are if you are a serious couple then you have probably talked about each other’s incomes. However, debt is a whole other topic. A lot of young people have some serious student loan debt. In fact, over 37% of people under 30 still owe on their student loans. On average, these people will still owe $25,000 on a bachelor’s degree and $45,000 for a postgraduate degree. 

It’s best to come clean about any debt you have since it will all show up when you undergo the pre-approval process for a mortgage: everything from car loans, personal loans, and even child support obligations. All of this plays into your debt-to-income ratio which is the number your lender will look at to decide if you can afford to pay back your mortgage. To get this ratio, your lender will add up all of your monthly debts and divide them by your combined monthly income. In order to qualify for a mortgage, that number can’t be over 43% but ideally, it should be below 36%. 

What is your credit score?

A credit score is a number that represents how well you have paid off past debts. From a lenders perspective, this number is incredibly important because that number shows how likely you are to make your mortgage payments in the future. A low credit score could disqualify you from getting a loan, or it could mean you won’t get the best rates.

How much money do you have for a down payment?

In a perfect world, the two of you will be able to put down 20% down on a property. For example, on a house that is $300,000, a 20% down payment is $60,000. On top of that, you will have to pay closing costs, which can be anywhere from 2% to 7% of the purchase price.  Additional loan options are available where you can put down less than 20%, in fact, some mortgages will accept as little as 3% down. However, then you will be required to pay a monthly fee called, Private Mortgage Insurance. 

So, as you can see there are quite a few questions to ask and things to think about. Don’t let any of this discourage you from becoming a homeowner. Your trusted S&D Real Estate Agent will be there the entire time explaining things and helping you through this process. Our goal is to get you into your dream home!