Considering whether you should start a family before or after you purchase a home can be daunting. It’s almost like the question, “What came first, the chicken or the egg?” Most young couples ask themselves whether they should spend the money on a house or on the baby first.
The truth is that there is no correct answer to the question, just like with the chicken and the egg. Buying a house and then having a baby makes sense for some couples. On the other hand, having a family and then buying a home makes sense for other families.
At any rate, whichever option you choose, here is what you need to know about getting home loans and making all of the expenses related to a home purchase.
Qualifying for a Mortgage Before You have Children
The mortgage qualifying process is the same whether you have a child or not. However, if you or your partner are on maternity leave when applying for the mortgage, the unpaid leave could affect your ability to qualify for the loan. Being on unpaid leave could affect the amount of the mortgage you qualify for, and you may not be able to verify all of your income. In this case, it might make sense to apply for the mortgage before you have the baby or wait until both of you are working again.
Determining What Lenders Look at
When you apply for a home loan, the mortgage lender will look at a few of your financial areas to make sure you qualify for the loan.
Income: The lender will look for your income to determine how much you can borrow. The more you make, the higher the mortgage amount you will qualify for.
Credit: Your credit history will influence the amount of mortgage you qualify for. The higher a credit score you have, the better loan you will get.
Employment History: The lender will also look to see how long you have worked with an employer or how long you have been self-employed. They want to see employment stability.
Debts: Lenders will also look for debts when reviewing your application. Your debts cannot be more than 36% of your income.
Assets: Lenders also want to see how much you have in savings. This lets them know you have enough money for the down payment and to make payments if you lose income.
In summary, you want to qualify for a mortgage loan some months before you decide to go home shopping. You also want to have time to put all the documents and requirements together. If you have a new child in the family, you might want to wait a few months before you apply for a mortgage.