1st Time Home Owner Qualifications
The sooner you educate yourself on the qualifications for a first-time home loan, the sooner you can get a mortgage and move into your new house. First-time borrowers may begin the process unprepared, and this lack of knowledge can result in a mortgage rejection. Know the qualifications and apply for a home when you're ready.
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Credit & Home Loans
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Qualifying for a first-time home loan involves meeting your home lender's requirements. Credit score minimums vary according to the type of home loan you acquire. For example, a conventional home loan may require a score of 680, whereas an FHA home lender approves first timers with a 620 credit score or no credit score. Even if you can get approved with a not-so-perfect score, it's always best to aim high and get approved for the lowest mortgage rate possible. Pay down debts and submit payments on time to raise your score.
Monitor Debt
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Pay attention to your current debts before applying for a home loan. Qualifying and getting approved doesn't require zero consumer debt. However, the less debt you have, the better you are with regards to qualifying for a home loan. Lenders look at how much you currently spend on payments to auto lenders, credit card companies and other lenders. Next, they'll calculate the percentage of the home loan payment in relation to your monthly income. Monthly payments cannot exceed 28 percent of your gross monthly earnings, and your total debt payments should not exceed 36 percent of total monthly earnings.
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24 Months of Income
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Stability is a key factor in applying for a home loan, and without 24 months of employment, a lender may encourage you to postpone your home loan application. Signs of stability and regular income include the ability to provide tax returns, banking statements or paycheck stubs for at least two years.
Down Payments
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Down payments can impact whether you qualify for a first-time home loan. Owning a previous property can result in having cash for a down payment on a new home (upon the sale of the old home). But if entering the real estate market as a first timer, you may have little cash on hand. Planning for a down payment before making your move helps the buying process go smoothly. Talk to your lender about down payment requirements. Requirements vary according to loan and typically range from 3.5 to 20 percent of the sale price.
Home Loan Quote
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Get two or three quotes from different home loan lenders to review your mortgage options. Quotes include interest rates, estimated monthly payments and estimated closing costs on a home loan. Closing costs run up to 5 percent of the loan balance; however, lenders can roll this cost into the loan balance. And if rejected for a mortgage loan, talk to the lender and get an explanation. This allows you to make the necessary improvements and reapply in the future.
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