I Rent, Do I Qualify for a Mortgage?
When it comes to finding out whether or not you qualify for a mortgage there are a lot of factors to take into consideration, from your credit history, to your annual income, the bank will go through your financial history with a fine tooth comb. One factor that does not impact whether or not you qualify for a mortgage however, is if you currently rent – at least not directly. When you rent you are essentially paying down another person’s mortgage every month. This is not a bad thing, and it is a very popular choice especially among people first moving out on their own. There are however a few things to keep in mind about renting that will impact whether or not you qualify for a mortgage. 1. Saving for a Down Payment One important thing to remember when looking to qualify for a mortgage is that you need to have a substantial down payment in order for a bank to take your application seriously. Depending on where you live, for a first time homeowner this can be as low as 5%, however, after that it quickly rises to anywhere from 10%-20%. This is the part that you finance yourself, and it shows the bank that you are serious, and have been working towards this for some time. The only time that renting impacts your down payment is if you are paying too much in rent that you are unable to save for your down payment. Your housing (and associated costs) should not cost more than 30% of your income. When you start paying more than that, it makes saving increasingly difficult. 2.Paying off Debt It is not only important to have enough of a down payment saved, it is also important to make sure that you have your debts under control, and are making regular payments to keep your credit on track. When applying for a mortgage your debt is something that will have a large impact on the decision. Remember, the bank wants to know that you are able to take on this additional huge debt, and that they will get their money back. In general, renting a house or apartment will not impact your ability to qualify for a mortgage any more than living at home with your parents will. The important thing to remember is that on paper you need to be ready. If you are continuously late on your bills, and have a low credit score because of that then odds are getting a mortgage will be more difficult than if you had a high score. If you do not have regular income, if you do not have enough money saved up for a down payment, these are the larger factors to consider. Remember, when it comes to qualifying for a mortgage where you live currently does not matter – as long as any rent is being paid on time.