Qualifying For a Home Loan
Many new home buyers may think they don’t qualify for a home loan because they have bad credit or they don’t have enough money saved to put twenty percent down on a home. However, you can still get approved for a mortgage. Here are some guidelines on what mortgage lenders use to approve you for a loan.
Employment History: You need about two years of employment history to qualify for a home loan. This doesn’t necessarily have to be with the same company, as long as you are working. It’s helpful if you’ve stayed with the same company or at least within the same industry.
Credit History: It’s necessary to have had debt so the lender can judge you on your repayment history. You should have a bank account and a credit card. If you have no credit, start with a secured credit card which allows you to pre-pay money on a card and then use it. Also, there are credit cards available to those with no credit or bad credit history, however be aware that these can have a higher APR meaning you pay more interest. Usually department store cards will approve those with no credit for a credit card.
If you have bad credit, you need to start rebuilding your credit. Pay off all collections if possible. Get a department store card and put small amounts on the card and slowly pay them off. As long as you don’t have a recent bankruptcy or foreclosure, you may still be eligible for a home loan. There are several loan programs for those with bad credit.
Besides credit cards, you can also establish a good repayment history by paying your rent on time. Set up utilities in your name (or cable, internet or phone accounts) and pay them on time as well. Although these accounts won’t show up on your credit report, they can establish you as someone who pays his bills on time.
Savings: Although you don’t have to have thousands tucked away for a home loan, you need to have some savings. You may only need to put 3.5% down on a home if you use a FHA loan. However, lenders like to see three to six months of savings to cover mortgage expenses if you unexpectedly lose your job or have an unforeseen financial burden. You are usually required to pay costs associated with a loan, such as the escrow fees, title fees, loan officer’s fees, realtor’s fees, and closing costs. There’s no set number required, but lenders generally favor those who have savings for a down payment and money left over after the loan closes. Generally, it’s better to have more money in the bank than to apply it all to a large down payment with little left over.
It’s best to first pre-qualify with a mortgage lender to determine if you’re eligible for a loan and to determine your loan limit. A loan officer can help you with ideas on how to improve your credit and other ways to strengthen your position. Your Southern Utah mortgage lender [http://www.keepitinhouse.com] can also discuss your loan program options depending on your circumstances.