The ultimate dream for many adults is the ability to purchase a home. For some, this comes early in life, for others, it might be later. Either way, with mortgage rates at the lowest they have been in years, it is the perfect time to find a home.
When looking for a place to live, the best thing to do is to get pre-qualified for the financing. Most people do not have enough cash to simply purchase a house outright. Because of the lack of cash assets, most individuals will look for a loan. Financing a home is a major purchase, therefore, it is important to find the very best lender for the deal.
Financing for a home loan can feel intimidating. The terms described, the vocabulary used, and the many pages of paperwork are often overwhelming to house hunters. Rather than trying to muddle through the process alone, choosing a knowledgeable real estate agent who has contacts with lenders can be extremely helpful.
Home loan qualification is often determined by several criteria. One of the first things that a lender will do is pull a credit report on the applicant. If the loan is going to be joint, then both people will have their credit pulled. Based on the credit risk, a lender will then gather additional information.
Job stability is an important component in determining eligibility for a loan. Most banks want to see two full years of employment with the same company. They usually want copies of the last two months of pay stubs as well as two months of bank statements. Once again if it is a joint application, they will want both people to have similar work histories.
Another area that lenders look is personal finances. They want to see that the buyer pays regularly on things like monthly bills and credit cards. Along with regular payments, lenders take a close look at the debt to income ratio of the individuals. This is a calculation of the amount of monthly debt owed and the amount of income coming in monthly. With the housing bust that happened in the last few years, more and more lenders are looking at this ratio to determine if the buyers are good risk.
The better the buyer's credit rating and debt to income ratio, the better the mortgage rates will be. The lower the percentage on the loan, the lower the overall payment will be in the end. Thus, taking care of personal finances are key when looking to take a slice of the American dream.