With over 33% of homebuyers being first time homebuyers, and that number projected to increase in the next several years…perhaps a great place to start with "Navigating Lending" is from the start?Verify my mortgage eligibility (Feb 29th, 2024)
So, you want to buy a house but don't have a rich Uncle willing to give you the cash, or that many zeros to go with the numbers in your bank account. That means you will likely need a Mortgage Loan. A Mortgage Loan is a type of debt that is secured by the home or real estate property you are purchasing and with an obligation to pay back the debt based on specific predetermined terms and payments. Honestly, no one really wants a mortgage they want a house and with that generally comes a mortgage.
There are many different loan program options for a mortgage loan each with different guideline requirements as to what is required to qualify. To determine what loan program you qualify for, or would be best for you, a licensed Mortgage Loan Originator will want to review documents and information related to your income and employment history, debts, and credit profile,
- Keep good records. The Mortgage Process can be one of the most document intense processes that you go through, especially after many new regulations and guidelines were put in place to avoid a repeat of the early 2000's housing market crash. This is especially important if your situation involves things such as self- employment or side hustles, divorce, bankruptcy, child support, other property ownership, overtime or bonus pay, or varied employment history. You will want to ensure that you have proper document records to give your loan officer for review to ensure that they document your loan qualification according to the guidelines of your specific loan program.
- Know your credit profile, but do not guess about how to fix it. We all have easy access to monitoring services like Credit Karma or my preference MyFICO. These are a great place to start to get an idea of what your report looks like and if there might be inaccurate information. Recent studies have shown that 79% of credit reports contain errors and inaccurate information, so looking at that prior to starting the home purchase process could improve your credit score position. Your credit profile and FICO score reflects how well you have used borrowed money. Therefore it is important to an investor preparing to loan you a substantial amount of money. Do not go it alone trying to fix it though. Partner with a reputable credit repair company to get accurate information on what steps to take.
- If you are planning well ahead of time, ensure that your "life" remains status quo or improving. Keep your bank account balances growing and stable without depleting balances or overdraft. Maintain your employment and minimum work hours to show that it is stable and reliable. Do not open any new credit accounts or obtain new debt unless you are working directly with your loan officer or credit building partners in that process. It is even a good idea to start paying your potential house payment by taking the extra amount over your current rent or mortgage and setting it aside in a savings account. Not only will this add to your savings, but you will also be very comfortable with your new payment well before you have it.
- Find the right loan officer or advisor for you. There are many great people out there that serve the lending community well. Unfortunately, there may be more that do not. In the rise of warehouse call centers and online lending, there are far more inexperienced people with large advertising dollars to spend to gain your attention quick. Many homebuyers do not realize that obtaining the right mortgage loan is more than just a transaction. Most of these call center type places do treat it just as a transaction without truly creating the right loan scenario for your personal situation. So how do you find the right lender? I will break that down in the next article.