Home buying and securing your mortgage can be a mysterious, if not scary, process that requires exhaustive research. If you’re a first-time home buyer, well, it can be even more daunting.
The good news is that there are several resources that are available to you. Knowing the requirements will keep your home buying dreams alive.
Here are the big three you should consider when buying your first home or even buying something after your credit was damaged due to a bankruptcy or foreclosure.
Good Credit. Scores above 740 tend to lead to better loan options. FHA loans only require a score of 680 or higher. You can find out what your credit score is for free here and here. No credit? Go for a secured credit card.
You can also build credit from scratch. Something important for younger home buyers, fresh out on their own and looking to buy to avoid paying rent (who wants to subsidize someone else’s home-ownership goals?)
What if you had credit and missed payments or renegotiated your payments through a counseling agency or worse yet, filed for bankruptcy or had your home foreclosed on? You’ll need to go about rehabbing your ailing score.
Stable and steady income. How much income you need to get a mortgage boils down to your debt-to-income ratio. To qualify for a home loan, your job’s income must be high enough to offset your current debts. Calculate your DTI (Debt-to-income) here
If your current DTI is too high to qualify (talk to your mortgage broker about your current DTI), consider developing a game plan to get your financial house in order.
Down payment. Most traditional banks require 20% down. Anything less often requires the dreaded PMI (Private Mortgage Insurance) but there may be ways around paying this expensive requirement when you have less than 20% down in cash. Contact me today so I can help you with lending strategies designed to address your unique situation.
State and local home buying programs are an excellent source of information for first time buyers looking for financial assistance.
You can reach out to these California agencies in your local community or on a statewide basis:
Don’t see your county or city listed? Try these links:
Also, FHA loans let you buy with as little as 3.5% down. California even offers a deferred-payment junior loan of 3% of the purchase price or appraised value. I can also introduce you to some grant programs where you only need 1% down (restrictions apply and not everyone or every property will qualify).
Lastly, the Veteran’s Administration also has some amazing programs for buyers that have served this great country. California offers its resident veterans CalVet. Nationally, the U.S. Department of Veteran Affairs also offers purchase and cash-out refinance home loan programs.
Additional Material: http://www.realtor.com/advice/finance/what-you-need-to-get-a-mortgage/