Things have certainly changed in today's housing market. Qualifying for a mortgage is harder than it was a few years ago, but it's not impossible. I've advised many clients in Manalapan on how they can qualify for a mortgage in today's market. Here are some helpful tips:
1. Inspect all three of your credit reports. Pull your credit reports from Equifax, Experian and Transunion. Make sure that all of the information is accurate. If you find an account that doesn't belong to you, submit the necessary form to all three credit reporting agencies to dispute the account.
2. Improve your FICO score. Unfortunately, mortgage lenders heavily weight your lending eligibility based on a score that doesn't accurately measure your financial stability. The FICO score only measures your ability to repay a loan. Improve your score by paying down debt, paying all of your credit accounts on time, and keeping open accounts with a zero balance.
3. Save for a bigger down payment. Buying a house with a 10% or more down payment shows you are serious about becoming a homeowner. If you're looking for a Federal Housing Administration loan, you'll need at least a 3% down payment.
4. Increase your household income. That's a tall order in today's job market, but mortgage lenders want you bringing in enough money to realistically pay for the loan. Two-income families qualify easier than one-income families. Pick up a second job, become a two-income family, or start a home-based business.
5. Choose a realistic budget. The rule of thumb is a mortgage payment that is 25% of your monthly household income. Choose a price range that fits this criteria. If you make $4,000 a month, then choose a price range that gives you a mortgage payment of $1,250. The term "house poor" comes from people that spend the majority of their income on a mortgage payment.
6. Stick with one employer. Mortgage lenders like stability, especially in today's market. If you can manage to stay with the same employer for more than two years, that will weigh in your favor.
7. Negotiate a price lower than the appraised value. If you negotiated a purchase price that is lower than the appraised value, you can consider it instant equity in the eyes of the mortgage lender. Follow the advice of your real estate agent on how to make the right offer.
Now is the time to buy, but lenders now have stricter guide lines for obtaining a home mortgage. Don't let this discourage you. Take this time as an opportunity to fine tune your personal finances. For more information on how to qualify for a mortgage, please email me firstname.lastname@example.org. Also, please forward this email to any of your family or friends who might also be in the market for a mortgage. You can find additional information about mortgages by visiting my website.
Roy Giordano Broker Associate, Manalapan Realtor 732-213-2438