For most of us, the biggest hurdle to buying a home is the cost.
Most of us get a long-term loan to help make ownership affordable. And as you approach the process of securing financing, you should get ready to provide a mortgage lender the following information:
Income and employment: What is your current income? Your income is proof to your lender that you will be able to pay the loan back on a monthly basis.
Interestingly, the house is not the basis of your loan approval — your income is. The first thing the lender wants to know is: “How will you be able to make the monthly payments.”
Different loan programs use different formulas to calculate what percentage of your monthly income should be allotted to housing, so it’s smart to ask your loan officer to help you shop and compare among several.
Are you employed? You’ll need to provide pay stubs as evidence of income, and your employer will need to verify your status.
Do you have a history of steady employment? Lenders like to see a steady history of employment in the same line of work. A recent job change is not a problem unless you changed your type of work.
Down payment: Your lender will ask how much money you have available for a down payment. The more down payment you are able to make, the easier it will be to qualify.
A down payment of 20 percent of the purchase price demonstrates your commitment to long-term homeownership and provides you with immediate equity in a new home. Loans requiring smaller down payments are available but are typically more expensive and require higher credit scores.
Credit history: Your loan officer will review your credit report to reveal how well you've met your financial obligations in the past. In addition, the lender will order a copy of your credit scores, which is a mathematical prediction of the likelihood you will default on the loan.
John Adams is an author, broadcaster and investor. He answers real estate questions on radio station WGKA-AM (920) every Saturday at noon. For more real estate information make a comment, visit www.money99.com.
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