If you are ready to leave renting behind and become a new home owner, there is no better time than right now. No matter what the average interest rates are, many banks offer special loan options to new homebuyers who have never had a mortgage in the past. While these loan types can really save you money and get you into your very own house, there are some qualifications that you must meet first. Here are just a few ways that you can increase your likelihood of getting approved for your first home loan.
Be Able To Prove Your Income
One of the main things that you will have to present and prove to your lender, is how much income you have coming in every month. In most cases, you will have to provide proof of the past 12 to 24 months of your income. Here are some ways that you'll have to provide proof:
- Last year and prior years' W-2 form
- The last 30 to 90 days of your check stub or direct deposit
- PayPal records if you're self-employed
- Bank statements
- Employment verification from your employer
Keep in mind that if you're reporting and using your spouse's income, they will have to be on the mortgage note too. Providing the correct income information will improve the chances that your loan makes it through the underwriting process.
Check Your Credit Prior To Contacting A Lender
It's important that you know what's on your credit report before you begin your loan application. Be sure to run your credit report by all three bureaus:
Take note of any red flags including delinquent credit accounts, credit cards in collection and missed payments. Any of these factors could keep you from getting approved for a first-time home loan. See what your FICO or credit score as well. A score over 700 is a good number for loan approval. Pay off all of your debt and bring your accounts to good standing before applying for a home loan. Each loan type and lender is different. Be sure to ask what their credit criteria are before applying.
Have Money For A Down Payment And Other Expenses
First time home buyer loans that are government backed may only require a minimum or zero down payment, but it's still good to have money available for unforeseen expenses and repairs. Some things you may have to pay out of pocket for before closing include:
- A home appraisal
- Home inspection
- Pest inspection
- Realtor fees
- Prorated taxes and insurance
You can also choose to put money down on the principal of the loan, this may help reduce your monthly payment and shorten the length of the loan.
Know Your Budget And Price Range
Before you embark on the real estate buying process, be sure to know how much home that you can afford. Create your own budget and don't go over that amount. Your lender will examine your income and debt and determine how much of a loan you'll get preapproved for. You don't have to stick to this amount. Choose a house and a payment that won't leave you strapped for cash every month.
Sticking to some of the basic fundamentals of getting pre-approved for a home loan will save you time and money in the long run. Contact a lender, like American National Bank of MN, for more help.