For those in the market for a home, you may begin your search with your thoughts full of the perfect dream home. If you are diligent in your efforts and have a great real estate agent to guide you, the home of your dreams may appear. Many people put the cart before the horse when it come to buying a home, however, especially first time home buyers. Before you look at a single real estate website or visit an open house, you should understand the dollars and cents of this very large purchase. Home loans are harder to get nowadays, but banks will lend money for mortgages if the applicant meets their standards. Read on to learn about the main problems you could encounter when searching for a mortgage and how to resolve those issues.
Low credit scores. Take a close look at your score, since most banks want to see a score of at least 620 for conventional loans, and at least 580 for FHA loans. You can improve your score, but it might take some time. Scour your report for errors, and report any problems to each of the 3 main credit bureaus, TransUnion, Experian and Equifax. If you have late payments on cards, only time will remove those marks. If you are using too much of your available credit, pay down some of your credit card debt before applying for a mortgage and watch your score rise.
No cash available. Some down payment cash is nearly always required, and the more you can come up with the better. Some loans only require about 3.5%, but many conventional lenders expect more like 20% down. Additionally, lenders like to see a healthy amount of savings in the bank that they call "reserves". It shows that you are more financially stable and ready to be a mortgage holder.
Income flow problems. Stable and steady employment history is required for lenders to lend. You should have several years in the same job or at least in the same general industry, and the more the better. Your yearly income is used to determine exactly how much the lender will loan you.
Too much debt. Hold off on any large purchases, such as a car, in the months prior to applying for a home loan and try to cut your debt load down to the bare minimum. Your monthly debt obligations will determine how much house you can afford to buy, so keep spending down and pay down the debts you already have.
To learn more about qualifying for a home mortgage, speak to your real estate agent.