- A first-time mortgage may offer a lower down payment and subsidized interest payments.neighborhood homes image by Wendi Evans from Fotolia.com
Buying your first home takes time, effort, and attention to detail, but if done right it can be a rewarding experience that can pave the way for a healthy financial future. The process starts with deciding on a price range, and can be successful if you have the down payment, credit score, debt-to-income ratio, and job history to obtain a mortgage to fit in that price range. - consider money image by Alexandr Shebanov from Fotolia.com
Loans backed by the Federal Housing Administration are at the low end of the spectrum and come with minimum down payments of 3.5 percent. According to Lending Tree, the best mortgage rates are available to those who can put down 20 percent, with good rates for borrowers who put down 10 to 15 percent. Certain banks offer a first-time buyer loan that allows for lower down payments and subsidized interest payments. - scrabble credit image by Bionic Media from Fotolia.com
According to Guy Cecala, publisher of Inside Mortgage Finance, borrowers will need a FICO score of at least 730 to get the best mortgage rates and they also will need to fully document their income and assets. Ensure that your credit score is as strong as possible by accessing credit reports. The Fair and Accurate Credit Transactions Act entitles consumers to one free credit report from each of the three major credit reporting bureaus (TransUnion, Equifax and Experian) each year. - debt defined image by Christopher Walker from Fotolia.com
Lenders require that all of your debt payments including car loans, student loans, credit card bills and the proposed mortgage payment be no greater than 36 percent of your gross monthly income. In that way your debt-to-income ratio, calculated by dividing your total debt payments by your pre-tax income, determines how much you can afford to borrow. - Employment / Self Employment Sign image by Sophia Winters from Fotolia.com
Lenders look closely at your employment record to decide whether or not to approve your mortgage. You’ll appear a lot more appealing if you have kept the same job for two or more years than if you’ve changed positions often. Lenders consider certain jobs and income levels more secure than others. For example, if you are self-employed or are paid on commission, lenders require financial information such as personal and business tax returns. Some borrowers apply with the stated income status if they have not been with the same employer for two years, or their position has changed.
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