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5 Tips To Increase Home Buying Power

With home prices rising at an unprecedented pace, more and more people are being priced out of home ownership. If you're one of those who are struggling to find the home of your dreams, increasing your buying power might be the answer. The following tips can help you increase the amount of money you're able to spend on a house which will increase your buying options.

1. Increase Your Credit Score: even though home loans are available to borrowers with credit scores as low as 580, lenders charge borrowers higher interest rates when their credit scores are below 720. Raising a credit score can reduce the amount a borrower pays in loan interest and thus will increase their buying power. It's important for every home buyer to know and track their credit score. If your credit score is lower then 720 there are steps that can be taken to increase it. Removing negative and inaccurate information from a credit report, lowering credit card debt and making payments on time will increase a credit score.

Before taking any steps to increase your credit score you should talk to a credit professional to make sure what you're doing will actually raise your score. Most people believe that closing credit cards will increase a credit score but actually closing lines of credit could lower a score. Talk to a lending professional before trying to raise your credit score on your own.

2. Lower Your Debt: when qualifying for a home loan a lender will calculate a borrower's debt-to-income ratio or, in layman's terms, how much of a borrower's income is spent each month on loan payments. Credit card debt, car payments and student loans all contribute to debt. When a borrower has a high debt-to-income ratio it will lower the amount they can spend on a new home. Lowering debt is one of the best ways to increase home purchasing power. If you're struggling to pay off credit cards, student loans or car loans you might consider cutting back on spending or getting a second job to pay down these loans. Every dollar spent on monthly loan payments is one less dollar that can be spent on a monthly mortgage.

3. Add A Co-Borrower: many buyers are adding co-borrowers to home loans to increase buying power. By adding a co-borrower a buyer is adding income which will allow a lender to increase the amount they can spend each month on a mortgage. Co-borrowers can be anyone with good credit, low debt and steady income and tend to be parents, spouses, siblings and close friends. These days many parents are becoming co-borrowers to help their children qualify for their first home.

4. Increase Your Downpayment: just because a borrower pre-qualifies for a certain loan amount doesn't mean that's how much they can spend on a house. Increasing the downpayment allows a borrower to pay more for a house than the loan amount. If a borrower qualifies for a $200,000 home loan and has $40,000 for a downpayment they can be shopping for houses in the $240,000 price range. There are lending regulations regarding borrowing money from family and others so before borrowing money for closing costs and a downpayment check with your lender.

5. Increase Your Income: one of the biggest criteria for qualifying for a home loan is income. Increasing income allows a lender to decrease the debt-to-income ratio and will qualify a buyer for a larger home loan. To increase income think about asking for a raise at work, adding a second job or taking distributions from investments. Not only will the additional income help raise your buying power but the additional money can be used to pay down any existing debt.

Before taking any action to increase your buying power you should work with a lending professional and put together a game plan to meet you purchasing goals. If you do not have a lending professional we would be happy to recommend a highly qualified lender to help you.

At Bleu Realty we're committed to bringing you important real estate news so you can be well informed when it's time for you to sell your house or purchase your new home. When you’re ready to buy or sell, Bleu Realty will be there for you every step of the way with expert guidance and innovative marketing strategies.

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