Are you done with renting and up for a buying your own home? This intimidating process involves an expensive learning curve where you have to gain insight into mortgage requirements. Do not worry! Robin Improve Yourself Consulting services can help the first time buyers in accomplishing their goal of buying their first home. Exploit our services and follow the following tips for qualifying for a mortgage with the best mortgage rates:
The need for down payment and LTV:
It is always favorable to approach a lender with down payment although buying a home without it is possible. Coming to the table with a 20% down payment is the real deal. Although when it comes to closing 15-10% will also be able to make you a strong home mortgage shopper. Remember that at the closing more down payment will get you more ownership and gets you to pay lesser financing over the total loan span.
Along with minimum credit score, the mortgage requirement that determines your eligibility for mortgage loans is your LTV (loan-to-value ratio). The ratio of the property against which you are applying for the loan in comparison to the amount of the loan should be maximum 80 %. You will have to pay 20% down payment if you don’t meet the LTV criteria.
As far as LTVs are concerned it’s always better if it stays on the lower side. Lower LTVs help you in qualifying for an improved interest rate. In case you are not able to keep your LTV lesser than 80% by saving up the needed down payment you will have to buy private mortgage insurance even though you are not utilizing FHA home loan.
Home affordability calculator:
Before you start looking for properties to buy it is always favorable to determine your affordability. Following three factors that determine your affordability range regarding properties:
- Your down payment
- Your current income
- You debt
The best way to determine your affordability is to use a home affordability calculator. It prequalifies you in the eyes of mortgage lenders by identifying and establishing your actual price range.
Difference between Pre-qualification vs. Preapproval:
Pre-qualification: It permits you to compare loan details and does not require access to your credit or does not need your social security number.
Pre-approval: This phenomenon implies that the lender is going to run your credit for uplifting for finances. Fundamentally, it is a painstaking way as you have to provide your social security number and put your credit report under strict inquiry, but it is the most apt and effective mode of shopping for a home loan.
Pre-qualification vs. Preapproval:
Understanding the phenomena of pre-qualification and pre-approval are encountered by all who endeavor shopping for the home loan.
Importance of Debt-to-Income Ratio:
Mortgage lenders prefer shoppers with the gross monthly debt that is 36% of the total monthly income. This debt includes credit card bills, car loans and student loans. This ration between debt and your monthly income is called the debt-to-income ratio.
Is your ratio too high? Do not worry! Robin Improve Yourself Consulting will help you in lowering it down by compensating high-interest credit cards. Also, while planning your budget keep in mind that your property insurance and taxes are included in the mortgage payment.
Credit Score and eligibility for Mortgage Loans:
Mortgage lenders consider your credit score a significant factor in defining your fitness for a home loan. In order to procure the most promising mortgage rates maintain a credit score of 720. If it is lesser than 720, although your loan will be approved you will not be able to meet the requirements for the lowest rates.
Low credit score makes you Subprime borrower:
Is your credit score below 620? Do not worry! You will still get the loan but the interest rate is going to be very high with only a 20% credit score. The best way to ensure your success is to ask the lender to consider you in the category of Subprime borrowers. Like a subprime borrower, you will be facing the threat of foreclosure for the lender, so you have to pay high-interest rate for compensating the lender.
Consistency in job history and mortgage loan:
In order to determine your ability to repay the mortgage(best mortgage rates), the lender is going to take into consideration your job history. A professional with years of experience in serving certain companies is always preferable in comparison to one that hops from job to job. The self-employed loan seekers will have to provide the lender with their bank statements for demonstrating their income history.
Gathering information about the phenomena involved in buying your first home will help you in saving you time, money (excessive fees and interest) and energies. Make the purchase of your first home hassle-free and fun by exploiting the services of Robin Improve Yourself Consulting for cutting out the potential ambiguities.