Purchasing your first home can be a daunting task, as the process involves a very large financial transaction and many components that the average person has just not dealt with until they navigate their first home loan process.
This article will talk about a few of the key items that a potential first time home buyer will want to have in place, before purchasing their first home
Employment
When purchasing a home, employment is very important, as it is one of the first steps in being able to qualify for a home loan is being able to pay for it. First, in order to qualify for a home purchase, in general most loan programs will require a two year work history in the same line of work, not necessarily the same job.
However, an exception to this rule, is if someone is a recent college graduate. If the degree received can be shown as a logical pre-requisite for the job they are now working, then the two year work requirement is waived, as long as you can show a two year combined work and school history and a completed degree.
For instance, if someone graduated with a degree in elementary education from a college and then went on to obtain a job as a school teacher at an elementary school and wanted to buy a home their first year of teaching, the two year criteria would be waived, as their education can be linked to their work history.
Income
Income is another key component of being able to purchase a home and ties right into employment. In general, when purchasing a home, a good basic measure of how much income you need to purchase a home is to look at debt to income ratios and keep them at or below 45%.
For example, if someone has a salary of $5,000 per month in gross income, their monthly debt payments, including their new mortgage, could not exceed $2,250 a month (45% of $5,000). So, a person would look at all debts they have that would appear on the credit report (credit cards, student loans, auto payments, etc.) and add up all of the monthly minimum payments. Let’s say that number was $500, if that is the case, you would then deduct that from $2,250 and in this case you would see that you could qualify for a mortgage with a monthly payment no higher than $1,750 per month.
Credit
Conventional loans have a minimum credit score requirement of a 620 and there are no minimum credit score requirements for FHA or VA loans, but you will generally need a 580 credit score. If someone does not have a credit score at all, due to insufficient credit, then they still may be eligible for a home loan, by using alternative forms of credit, such as proof of cell phone, rent and utility bill payments.
Down Payment
The down payment will vary by the loan program, but for a first time home buyer, there is a 0% down payment require for a VA loan, a 3% down payment required for a conventional loan and a 3.5% down payment required for an FHA loan.
These are some of the most important basic requirements to qualify for your first mortgage. However, as always, if you are looking to be qualified for a new home loan for the purchase or refinance home loan, please speak with a licensed lender such as Strategic Mortgage, to fully and properly pre-qualify.
For more information on home purchase loan or refinance programs for existing and potential home owners, please contact Bill Kamboukos of Strategic Mortgage at (480) 219-3682 or by emailing: info@strategicmtgaz.com or online at www.strategicmtgaz.com
Strategic Mortgage, LLC - NMLS#158804 - Equal Housing Lender
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