Homeownership has long been a symbol of the American dream. Our homes often represent far more than just shelter – they are central to family life and building strong communities.
The economic impact of homeownership can’t be overlooked either. Homes are the largest source of wealth for Americans, which makes buying a home one of the most important steps people can take toward creating generational wealth and securing their family’s financial future. In fact, according to Chase’s latest First-Time Homebuyer Study, over half (58%) of respondents are likely to purchase a home in the next 12 months and 70% see homeownership as an important step to building wealth.
While owning a home might be a goal for many, it can feel out of reach for those who have faced barriers to homeownership in the past. The good news is that many resources are available today to help people buy a home and stay there as long as they desire.
Here are three tips to help you qualify for a mortgage to purchase a home of your own.
- Build and improve your credit.
It’s important to know where you stand so you can make a plan to maintain, improve or build your credit. Generally, a higher credit score means you’ll be able to qualify for the most competitive interest rates, which could help you save significantly. You can get a copy of your credit report for free at annualcreditreport.com, or check your score through your financial institution.
If you have a low credit score, you can work on raising it by paying down credit card and loan balances and making bill payments on time. Avoid opening or looking for any new credit cards or loans while in the process of buying a home, as the credit checks required will lower your score and increase your debt-to-income ratio.
When applying for a mortgage loan, you’ll be asked to submit payment history to show you have a steady income. If you’re thinking of switching jobs before buying a home or while going through the buying process, consider waiting until after you have closed on your home.
2. Save for a down payment and look for financial resources.
It’s a common misconception that you must put down 20% of the home price as down payment—there are many lower down payment options available, such as Chase’s DreaMaker mortgage that could qualify you for down payments as low as 3%. However, keep in mind that the more you pay upfront, the less your monthly mortgage payment will be. Look for online mortgage calculators or speak to a lending professional to get an idea of how different down payments could affect your mortgage.
Take the time to research financial resources that may be available to you. Many state and local governments offer first-time homebuyer programs, which encourage residents to buy within their home state, with incentives that can include covering a down payment or lower interest rates. Lender-backed financial resources may be available, too.
3. Find the mortgage option that works for you.
One mortgage doesn’t fit all, and there are many options to suit all lifestyles and budgets. A 30-year conventional mortgage is most common, but you can also get a loan term of 10, 15 or 20 years.
Some mortgages have a fixed interest rate, which means it doesn’t change over the life of the loan. There are also adjustable rate mortgages, which usually offer lower interest rates in the beginning, but adjust at certain intervals over time, typically increasing your overall payment. Get in touch with a lending professional who can help you understand your options.
The bottom line
Starting the homebuying process can feel overwhelming, but you don’t have to do it alone. There are many tools, resources and professionals dedicated to helping you achieve the goal of homeownership.
For more tips and information on home buying, visit chase.com/mortgage, and try out the Homebuyer Assistance Finder at chase.com/affordable.