If you are in the market for buying your very first home, then my advice is to see if you qualify for a home mortgage loan before you do anything else. Knowing that you do qualify and for how much can help you narrow down what to look for. Your real estate agent normally starts the pre-qualification process through a mortgage broker, however, this doesn't guarantee you will be approved for the type of loan that you need.
It is important you know how you can afford to pay for a house and for the banks loaning you the money, it's even more important. The last thing you want is to waste time or money bidding on a house you cannot afford or even applying for a loan you'll never be able to pay back on a monthly basis. Here are a few easy to follow steps to help you get on the right track getting qualified for a home mortgage loan:
First and foremost, it is important that you have money to begin with. You may be getting a loan that covers the cost of the home down to the penny but that doesn't include the closing costs you will be require to pay. My recommendation is to start saving up.
Any negative marks against your personal financial history such as unpaid debts, collections and judgments, must be taken care of beforehand. These represent a potential lien on the property and will not help you in your quest for a mortgage approval. Banks and lenders don't normally sign off on loans for people that have previous debt problems or current outstanding debt situations. The only exception is in instances where the statute of limitations is expired.
One thing you will need is a copy of your credit report. Annually, you can get a complimentary copy of it by contacting the three main credit bureaus. After you receive them, review it over and be sure it's completely accurate. Make an effort to pay off any past due notices on the report and get them current. The majority of lenders and banks will let you pay any outstanding debt with the new loan you are taking out on your new home if you plan on going the refinancing route. The magic number to aim for is a 620. Anything above this number should get you qualified for a good interest rate. However, anything below will prove to be difficult to work with for many lenders.
If you are self-employed, you are required to own the business for at least two years minimum/ Keep all according tax returns and bank statements to prove so. If you work for someone else, you must be able to document the last two years of employment. You will also be required to provide your most recent paycheck stub and W-2 tax form. You must also document your last two years of residency.
You lender will be able to tell what type of loan you qualify for and its amount by your income and credit score. The more income you take in and the better credit score you have, then the more loan programs you will be qualified for.
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