Hello World! Welcome Friends! As a homeowner, you know that owning a property is a monumental task. Although there is a lot of work in the process, everything will have been worth it once you have settled into your new home. Down the line, you may begin to feel the desire to move into a bigger residence. While you can upgrade your existing premises, making the move to a larger home is also a possibility.
Moving into a bigger home is certainly appealing, but only if you have the right financial circumstances to do so. Financing a bigger house can be a hefty task. To simplify the procedure, go back to what was done during your first home-searching venture. Here are some of the best ways on how you can finance a bigger house:
1. Debt-to-Income Ratio
Every home is valued based on a multitude of factors. For example, a lender will ask you about various pieces of financial information to review the value of your home. Your current debt-to-income ratio is a primary focal point, as it indicates whether or not you are in a viable position.
The same sentiment applies to financing a bigger house. Your current debts, such as mortgage payments, will be reviewed meticulously. Should your debts be near or larger than your income, you won’t be considered as a safe borrower for a new loan for the home. It is always recommended to mitigate your debts as much as possible, before acquiring other financing.
2. Home Equity Line of Credit
As mentioned previously, you may be thinking about physically moving to a larger home down the line. If this is the case and you would like to keep your existing home, you’ll need to consider your options. Being able to finance the new home can come via a second mortgage, such as a home equity line of credit.
Colloquially known as a HELOC, this loan can be regarded as a revolving line of credit, such as a credit card. You are generally allowed to borrow as much money from the HELOC as you need. Just remember that it is based on equity stored within your original property. Keep this in mind as you move into the further stages of financing.
3. Credit Rating
No matter which lender you go to, each professional will stress the importance of having a good credit standing. As a result, do as much as you can to not impact the credit rating in a negative manner. For the most part, this involves being able to make your monthly payments on time and pay down all your debts.
Your credit rating will also be impacted by your debt-to-income ratio, especially if your debts are increasing. The best tip to keep in mind is to be realistic with your financing, especially if it involves moving into a bigger home. That way, you’ll be able to keep your credit in a favorable standing.
4. Down Payment
Of course, you will also eventually come across the aspect of the down payment for a larger home. In most cases, the original twenty percent will be required, in order to make ends meet for the short term. However, if your current financial circumstances allow for it, try to put down a bit more.
Not only will this help to protect your investment into the new home, but it also protects the lender as well. The more you put into your down payment, the more favorable your monthly payments become down the line. Plus, you may also be able to gain the advantage of a lower interest rate too!
5. Income Sources
To make your situation even more secure, having more than one income source can make financing a walk in the park. For instance, you don’t just have to show your lender a salary as your sole income source.
The money you make from various investments or rental properties can be considered as an income source. If you are self-employed, a side business income can also help better your chances of securing more financing as well.
For those who are married, you may want to consider co-borrowing with your partner. A larger loan can be acquired if both borrowers make a steady source of income. This increases your financial ceiling, as to how much you can end up taking out in a loan.
6. Shop Around
Don’t be afraid to ask multiple professionals for their advice! You don’t just want to go with the first lender you get into a meeting with. Ask for quotes from multiple representatives, and always ask questions. Take into consideration what loans you qualify for, in order to better your secondary home prospects. That way, the eventual move in day will have been worth the wait!
Click the links below for any posts you have missed:
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Toodles,
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