Without question, today's real estate market is considered a buyer's market. By understanding the reasons why people are having trouble getting a mortgage, you can make sure that you are in position to buy. Learning these issues that others may have encountered you can make the whole home buying process much more enjoyable. I have said over and over again that buying a home is the largest purchase that you will make... by educating yourself it does not have to be the most stressful purchase you make.
- Credit - This is the first item that your lender will look into. My advice would be to check your credit history. There could be items on your report that are old and not reporting correctly that could really hurt your chances of becoming a home owner. There are plenty of services available to not check your credit score but also services to show you how to improve your score.
- Understanding options - There are a lot of myths out there that you will need 10-20% of a down payment. This is not something that should keep you from becoming a home owner. There are still FHA (3.5% down payment), USDA (no down payment), and VA (no down payment). When making your choice of lenders and real estate agents, I would always make sure that you feel comfortable that they go over all the available options for you.
- Employment Status - This is looked at very closely today. With jobs being a major issue with our economy today, if you change jobs frequently and have declining income over the last few years this could end up be a critical issue if you are able to become a home owner. With a history of declining income, lenders want to protect themselves. There are a lot of other costs that go into being a home owner that isn't included when qualifying you for the mortgage.
- Debt Load - you could have a great job and earning solid monthly income but if your debt load is high, you could have a difficult time qualifying for a mortgage. We are seeing this lot with recent college grads. Student loans, high auto payments, and credit cards could end up costing you the ability to buy a home.
- Home Market Value - Lenders will not allow you to buy a home with a higher purchase price then appraised value. An appraisal report will be done on each transaction to verify that the home is worth at the very least at where the agreed upon sales price is. This is protection for the lender and you as a potential buyer. With market values decreasing today, you can see this causing a problem if the home does not appraise.
Buying a home is not for everyone but if this is something you hope to accomplish then understanding the items above is a great start to putting yourself and your family is position to own a home. The toughest mortgage to get is your first one. Again it is important to work with a lender and real estate agent that are patient with you and willing to help educate you throughout this process.