For many people,
taking
out a mortgage is quite possibly the single largest
financial transaction they will ever be a part of. It is easy
to understand how accepting the responsibility to pay back a loan
of hundreds of thousands of dollars can be quite intimidating!
It is not unusual for many would be first time home buyers to
just simply avoid the whole process and continue renting a home
or an apartment instead of purchasing their own home. Luckily,
in most cases, this fear is the only thing keeping them from owning
their own home. If this sounds like you, I have great news! You
could be just weeks away from home ownership!
With just a little
bit of information, knowledge, and guidance, even the most timid
would be home buyer can be well on their way to overcoming any
fear and on the road to making a home purchase.
In order to
take
out a mortgage you will need to prove two things.
The first is your credit worthiness; the second is your ability
to repay the loan. The better your credit, the easier the process
will be. However, even if you think you have “bad credit”,
you could be pleasantly surprised at what you can qualify for.
If you can,
avoid making any large purchases until after you take
out a mortgage. You want to keep your monthly debt
obligations as low as possible and be able to demonstrate to a
potential lender that you have the ability to cover your current
obligations (car loans, credit cards, etc.) as well as your new
mortgage payment.
Obtain a copy of your
credit report and review it for inaccuracies. Look for information
that doesn’t belong to you is incorrect, or that is older
than seven years of age. If you find any of these items, dispute
them with the credit reporting bureaus. When you obtain your credit
report, the information needed to dispute errors should be included
with the report. Also, don’t be afraid to speak with a mortgage
professional right away. They can help you determine things you
can do to improve your credit situation in the eyes of a lender.
Paying down debt is
also a good idea if you can afford to do so. However, lenders
like to see that you can manage debt, so don’t be afraid
to keep small balances on your credit cards. Many feel that utilizing
up to 30% of your available credit is the optimum amount. For
example, if you have a credit card with a $10,000 limit, you should
have a balance of $3,000 or less. Also, don’t close out
old credit cards. Having old credit cards with zero balances demonstrates
that you have the ability to have credit and not use it. Also,
lenders and credit agencies like to see long established accounts.
Avoid changing
jobs as you near the time to apply for a new mortgage.
If you do change jobs, try to stay in the same field or line of
work. Lenders like to see two years of work history in the same
field. Also, if you’re planning on purchasing a home in
a new area or state and then relocating and finding a new job,
you will need to line up your new job up first before purchasing
your new home. It isn’t hard to understand why a lender
will not lend to a person who doesn’t have a job yet! The
exception to this rule is if you have just obtained a new degree
or certification. Time spend in college can count as “job
history” once you have lined up employment.
While it is
possible to obtain 100% financing
and purchase a home with zero down, being able to put money into
the purchase will help you obtain the lowest interest rates and
best loan terms. The better your credit, the less lenders will
require you to put down. With a credit score of 600, you have
a good chance of qualifying for 100% financing. Below 600, you
will need a minimum of 5% and as much as 20% of the purchase price
for a down payment. Separate from the actual purchase price of
the home, you will need between 2% and 5% to cover closing costs
associated with the purchase.
In general,
you will need to provide some or all of the following documents
once you apply for a mortgage.
Two months of bank statements or investment statements showing
the money you plan to use for a down payment and for closing costs.
Your most recent pay stub and W2 or tax returns to prove your
employment and income. For those who are self employed, you will
need to provide a business license or professional license. If
applicable, you will need to provide copies of divorce paperwork
as well. If you have already made an offer on a property, you
will need to provide a copy of the purchase contract and receipts
for any down payments or deposits you have already made.
Additionally, your
broker or lender will provide you with an authorization form that
you will need to sign granting them permission to examine and
validate your credit and employment information.
The above should be
taken as a general overview of what you can expect when applying
for your first mortgage. With that being said, it is important
that you understand that every single mortgage transaction is
unique. If you are about to enter the process or are just wondering
where you stand when it comes to qualifying, your first step should
be contacting a mortgage professional. Don’t feel ashamed
or embarrassed if your financial past has some issues or hiccups
that you would rather forget. We’re all human and things
happen.
Find a mortgage professional
that you are comfortable working with. Don’t work with anyone
who makes you feel pressured or rushed. It should not be necessary
for a lender or broker to pull your credit or take a deposit from
you before they will agree to even speak with you about your situation.
These are frequently just sales tactics to make you feel like
you are tied into dealing only with them. Don’t be afraid
to walk away from anyone you don’t feel comfortable with.
Be honest with whoever you choose to speak with. If you don’t
provide them with accurate information, they won’t be able
to give you accurate advice. Also, if you don’t understand
something, don’t be afraid to ask questions.
Now that you
have some information on the mortgage
process, your next step is taking action! Contact a mortgage
professional today and find out exactly where you stand and put
together a plan to get you moving! Regardless of your situation,
odds are you are between 30 days and 2 years from owing your own
home if you start now!
Contact us
today to find out exactly where you stand. You could be
closer to home ownership than you think! No Credit Checks, Upfront
Fees or Appraisals are required. Call
us now at 1-888-529-5506 or fill out the short form below and
move yourself one step closer to the dream of home ownership!
