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Are you ready
to buy a new home? |
There are some general guidelines that help a lender in
looking at these pieces of information. But you should
remember that there is some flexibility in these guidelines,
because everyone’s financial situation is different. If you
are strong in one area, it may help balance out another in
which you are not quite as strong. |
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When you want to buy a home you will be faced with many
decisions. The first is whether you are actually ready
to buy. Finding the right home is not always easy, and
getting a mortgage loan can be time-consuming and
complicated. When a mortgage lending institution makes
your loan, it has determined that there is a good likelihood
that you can keep that promise. The lender knows that it
does not help you or the institution if you are given a
loan, but then, for any reason, are unable to make payments
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each month. To decide if you will be able to repay the loan,
the lender will look at many different pieces of
information. This process is called “underwriting”. These
pieces of information show how well you have repaid you
debts in the past, whether you are likely to repay your
debts in the future, and your ability to repay the mortgage
and your current debts. This process seems frustrating at
times and the lender may ask you for additional
documentation to show your ability to qualify, but it is all
part of the loan process. |
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Job History |
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This is important. Having a steady job helps keep your
promise to pay back a mortgage loan. If you have been
working continuously for two years or more, you are
considered to have steady employment. A lender will need to
know your job history, and it will be a major factor in
whether you qualify for a loan. However, you do not have to
have held the same job for two years, job |
plus for you. If you have been working continuously for less
than two years, the lender will look for an explanation.
There may be a good reason: you may have been discharged
from the military or just finished school, or your work may
 be
seasonal. There are many other acceptable reasons |
why
you have not been employed for two years, for example you
may have been laid off or illness. The lender takes into
consideration all of these factors when determining whether
you qualify or not. |
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Paying Your Bills on Time |
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How
you paid your bills in the past gives a lender some
indication of how you can be expected to pay them in the
future. When you apply for a mortgage, you will be asked to
list all your debts, the amount of your monthly payments,
and the number of months left to pay on the debts. Your
lender will order a credit report to
verify the information that you give. It is important to
disclose all debts |
and
any difficulty you may have had in the past in repaying
them. It is also important not to leave out any information
about money you owe. If you have previously owned a home,
and your mortgage was foreclosed upon, this will be revealed
on your credit report. Having a foreclosure does not mean
you can never buy another home. Your lender will want to
know the reason and most prefer that three years go by
before you |
apply again. If you have declared bankruptcy, this will be
revealed, and it will be helpful to explain the
circumstances. Lenders usually prefer that you wait two
years before assuming a new large debt, this gives you time
to re-establish your credit. If your credit report shows too
many debts, or late payments, you should work to bring your
payments up to date and pay off some of the debt, this also
helps in qualifying for a loan. |
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Do You Have
A Credit History? |
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you have never had any credit cards or taken out a loan, the
credit agency may not be able to issue a credit report on
you. In this case, you may be able to use “nontraditional”
credit |
history. for example, you may be able to document that you
pay your rent, telephone bills, or utility payments on time
each month. You can put these records together yourself by
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making copies of cancelled checks or showing copies of
monthly bills that do not have any late charges. A mortgage
lender may be able to help you put this information
together. |
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When you buy a home, you will need money that you have saved
for a down payment and “closing costs”. The amount of the
down-payment may vary depending on which type of loan you
choose, but generally it is around 3-5% of the purchase
price. You will also need money for closing costs and your
escrow |
account . Sometimes the property seller is willing to pay
part of your closing costs. The lender will want proof that
you have saved the funds. If the funds are in a savings
account, the lender will ask to verify the amounts and the
length of time the funds have been in your account with
copies of your |
bank statements. The lender wants to make sure you are not
borrowing money. With some programs you may be able to
accept a gift from a relative for these amounts, while with
others, it must be your own funds. There are also grant
programs in different communities that assist homebuyers
with closing costs. |
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Can you Afford
a Mortgage? |
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| If
you pay rent each month, you may be prepared to make monthly
mortgage payments. The amount of your payment depends upon
the amount |
you
borrow, the interest rate, and the repayment period. The
shorter the term, the higher your payment. For that reason,
most home buyers usually |
repay their mortgage for the longest term. Lenders look at
your current rent payment and compare it to your new
mortgage payment. |
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You're ready to buy a home!!
What do you do first? |
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If you have read all of
the information enclosed, you may be ready to begin
the process of buying a home. You may want to call a
local real estate agent to show you homes in your area
or call us for our preferred list of realtors in your
area. You may also want to make an appointment with
one of our loan officers to discuss all of this
information.
It will take some time working with a real estate
agent to find the right home in the price range that
you can afford. There are also many factors to
consider, such as taxes, and a real estate agent can
help you with your needs. |
It will also take time to
apply for a mortgage, have us evaluate your
application, and have your loan approved. Still more
time is required to do all the
 necessary
paperwork and close on your loan. But in the end, you
will have a home for you and your family, and you will
have achieved an important part of the American dream. |
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