Taking Out A Mortgage: Don't Let Fear Become An Obstacle to Home Ownership
With just a little bit of information, knowledge, and guidance, even the most timid would be home buyer can be well on their way to overcoming any fear and on the road to making a home purchase.
In order to take out a mortgage you will need to prove two things. The first is your credit worthiness; the second is your ability to repay the loan. The better your credit, the easier the process will be. However, even if you think you have "bad credit", you could be pleasantly surprised at what you can qualify for.
If you can, avoid making any large purchases until after you take out your new mortgage. You want to keep your monthly debt obligations as low as possible and be able to demonstrate to a potential lender that you have the ability to cover your current obligations (car loans, credit cards, etc.) as well as your new mortgage payment.
Obtain a copy of your credit report and review it for inaccuracies. Look for information that doesn't belong to you, information that is incorrect, or that is older than seven years of age. If you find any of these items, dispute them with the credit reporting bureaus. When you obtain your credit report, the information needed to dispute errors should be included with the report. Also, don't be afraid to speak with a mortgage professional right away. They can help you determine things you can do to improve your credit situation in the eyes of a lender.
Paying down debt is also a good idea if you can afford to do so. However, lenders like to see that you can manage debt, so don't be afraid to keep small balances on your credit cards. Many feel that utilizing up to 30% of your available credit is the optimum amount. For example, if you have a credit card with a $10,000 limit, you should have a balance of $3,000 or less. Also, don't close out old credit cards. Having old credit cards with zero balances demonstrates that you have the ability to have credit and not use it. Also, lenders and credit agencies like to see long established accounts.
Avoid changing jobs as the time nears for taking out a mortgage. If you do change jobs, try to stay in the same field or line of work. Lenders like to see two years of work history in the same field. Also, if you're planning on purchasing a home in a new area or state and then relocating and finding a new job, you will need to line up your new job up first before purchasing your new home. It isn't hard to understand why a lender will not lend to a person who doesn't have a job yet! The exception to this rule is if you have just obtained a new degree or certification. Time spent in college can count as "job history" once you have lined up employment.
While it is possible to obtain 100% financing and purchase a home with zero down, being able to put money into the purchase will help you obtain the lowest interest rates and best loan terms. The better your credit, the less lenders will require you to put down. With a credit score of 600, you have a good chance of qualifying for 100% financing. Below 600, you will need a minimum of 5% and as much as 20% of the purchase price for a down payment. Separate from the actual purchase price of the home, you will need between 2% and 5% to cover closing costs associated with the purchase.
In general, you will need to provide some or all of the following documents once you apply for a mortgage. Two months of bank statements or investment statements showing the money you plan to use for a down payment and for closing costs. Your most recent pay stub and W2 or tax returns to prove your employment and income. For those who are self employed, you will need to provide a business license or professional license. If applicable, you will need to provide copies of divorce paperwork as well. If you have already made an offer on a property, you will need to provide a copy of the purchase contract and receipts for any down payments or deposits you have already made.
Additionally, your broker or lender will provide you with an authorization form that you will need to sign granting them permission to examine and validate your credit and employment information.
The above should be taken as a general overview of what you can expect when applying for your first mortgage. With that being said, it is important that you understand that every single mortgage transaction is unique. If you are about to enter the process or are just wondering where you stand when it comes to qualifying, your first step should be contacting a mortgage professional. Don't feel ashamed or embarrassed if your financial past has some issues or hiccups that you would rather forget. We're all human and things happen.
Find a mortgage professional that you are comfortable working with. Don't work with anyone who makes you feel pressured or rushed. It should not be necessary for a lender or broker to pull your credit or take a deposit from you before they will agree to even speak with you about your situation. These are frequently just sales tactics to make you feel like you are tied into dealing only with them. Don't be afraid to walk away from anyone you don't feel comfortable with. Be honest with whoever you choose to speak with. If you don't provide them with accurate information, they won't be able to give you accurate advice. Also, if you don't understand something, don't be afraid to ask questions.
Now that you have some information on the mortgage process, your next step is taking action! Contact a mortgage professional today and find out exactly where you stand and put together a plan to get you moving! Regardless of your situation, odds are you are between 30 days and 2 years from owing your own home if you start now!
Related Tags: home loan, first time home buyer, taking out a mortgage, california mortgage, mortgage in california
Contact MyRefi.com for a free no obligation consultation to see if you can qualify to take out a mortgageas a first time home buyer. In less than 15 minutes, we can either prequalify you for a loan or help you understand the steps you can take to put you on the path to home ownership. If you currently own a home, the same 15 minute or less free consultation can help you identify whether your current mortgage is the right loan for your unique situation. Whatever your goal is, home ownership, lower monthly payments, debt consolidation, or cash out, we are here to help.
Looking for a Mortgage In California? Visit California Refinance for all your California Mortgage needs.
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