Mar 12, 2015
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Qualifying For A Home Loan

At some point in our lives we will decide that we don’t just want to live in an apartment anymore, but want to buy and live in our own home. Many people who have never bought a house before believe that it will either cost a fortune or be next to impossible to get that deed in their name. Applying and getting a home loan isn’t as farfetched as it may seem however, as there are only a few things that you need to qualify for a mortgage loan. Here is what you will need before being able to have a lending service support you in your purchase for a new house.

Credit

Having a decent credit score is the most vital parts of qualifying for a home loan. While it will not have to be a perfect score, most companies will not give you the loan if you have a credit score under 620. These lending companies will use your credit score as a reference point for how likely it is that you will pay them back, so having some records of a good credit history is an important part of the process. In addition to that, depending on high or low your score is will also determine what kind of interest rate you will be offered. Lenders will also be looking at your overall credit score report because they want to make sure that you do not have any huge debts that need to be paid. If you have been renting a home or apartment for the last couple of years, they will also inquire as to if you managed to pay rent on time for at least the previous full year.

Qualifying For A Home Loan

Income and Debts

Your “debt to income” ratio is another aspect that will be closely examined by a mortgage lender to make sure that you will have enough income to cover both your current monthly expenses along with a mortgage payment. If they see that you will be spending beyond your means, there is a good chance that the loan application will be denied. As a rule of thumb, these lending services are looking to see that you are spending less than half of your gross monthly income with all other expenses and bills included. These are not like phone bills, for example, but more like car loan payments, student loans, other mortgage payments, homeowners insurance and property taxes. In addition to that, lenders will want to see proof of good employment history to show that you will continue to receive monthly income. It can be a little more difficult if you are self-employed, because they will want to see a consistent payment system in place for at least two years as opposed to a regular office job.

Down Payment and Equity

Usually, the minimum down payment required when buying a house is about 3.5% of the sale price. In this case, you will be able to get a FHA loan if this is your first time making a house purchase. If you have been through the process before but it has been several years, a conventional loan is the more likely option that requires a 5-10% depending on who you are getting the loan from. Bear in mind that when it comes to buying a house you will need more cash than for just the down payment, but also for other settlement fees if you are making a purchase in a certain type of area. The beneficial part of this is that most home loaners will allow you to get credit from the person you are buying from to assist with these other fees and for the first year of insurance and taxes.

Written by Reza Abadi of USA Mortgage. USA Mortgage is the best company for home loans Columbia MO has to offer!

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