Basic Steps to Getting a Mortgage, You Can Do IT
The basic qualifications for getting a mortgage loan include: 1) a good credit score (varies, depending on loan program), 2) positive job history (ususally two years in the same line of work), and 3) A down payment.
A few years ago the down payment requirement was not such a big deal. This is when banks were offering a first & second mortgage and at times, yes, a THIRD mortgage. =( Now that the market has realized this type of lending doesn't work so well, banks have done away with a lot of subprime lending. If you're in the market to buy a house today, you'll find that you will need sufficient credit, a J-O-B, and a sizeable down payment (usually about 3.5% to 5%). Unfortunately, if you have two of the three requirements, guess what? You won't qualify at the time.
The minimum required credit score for a FHA loan (as of today, because they're changing guidlines consistently) right now is 640. It used to be 620 just recently. Now, if you qualify for the Alaska Housing Finance Corporation Loan, also known as AHFC, you need a 620 credit score. To qualify for a Conventional loan, you can get by with 620 but the mortgage insurers, most likely, won't touch the loan.... So, you better have 20% down. Realistically, a 680 credit score on a Conventional Loan, with 5% down, is usually the most ideal way to go!
Step One to Home Ownership..
Credit Score
1) Stay way below your credit limit. I learned this the hard way when Bank of America reduced my credit limit by 50%! Since my balance, at the time, was 50% of the credit limit, when Bank of America decided to reduce my limit.... it basically showed to the credit bureaus that I was maxed out on my card... which dragged my credit score down quite a bit. So, the basic rule of thumb is to keep your debt to credit ratio at around 25%. Ex: If your credit limit on a card is $1,000, use less than $250 each month and pay it off.
2) If you know that you're going to apply for a Mortgage and you really really want to own Your own Home, Don't apply for new Credit. Don't open any new accounts! This includes credit cards, store credits, auto loans, co-signing on your your mom's car, your son's car, your sister's car...well you get the idea.
3) Pay down your debt but don't close your credit cards... I repeat, PAY OFF YOUR DEBT but DON'T CLOSE your accounts. Why? When you close your accounts, it reduces the available credit on your credit report. Available credit that you're not using will help you. Remember the 25% rule with credit though.
4) Pay All your Bills ON TIME.
5) Check your Credit Report and Dispute any Negative Items that are not familiar to you. For example, if you see a charge on there from Joe the Builder and you never opened any type of credit with Joe the Builder, then Dispute it. It's important to remove any negative hits on your credit report that don't belong to you.
Step Two to Home Ownership...
This isn't really a step. It's something that's plain out required unless you have a ton of money $$$$ and can pay CASH for a HOUSE. It's called a JOB. Usually 2 years are required.. sometimes, with FHA, you can get away with less.
Step Three to Home Ownership...
This is a BIG step for a lot of people. Most people have a hard time just making ends meet. Many families are living check to check. But remember, if there's a big enough REASON, you can make sacrifices or changes to your habit(s) to save the money that is needed for your down payment.
1. Set aside a small amount from your paycheck each pay period. Have this done automatically so you don't even see, smel, or touch the money. If it's automatic, trust me, it'll make it much easier. =)
2. When you get a pay raise, keep the same lifestyle. What happens a lot of times when people receive a pay raise is their standard of living goes up. Celebrate the raise, celebrate the moment BUT have it stop there. If you were fine living the way you were before you got the raise, then put aside the difference that you're making and shove it into your Home Savings Account.
3. Is there something that you can give up or cut down on? Are you a Starbucks Coffee Addict? I'm guilty of this myself. If you are spending $4.50, two times a day on a cup of coffee... You will spend about $270/month. That's $3,240 per year!
There are so many other ways of saving for a down payment, such as buying a vehicle that is used as opposed to a brand new car, getting rid of the gas guzzler and trading it in for a smaller more efficient car, shopping in bulk, using coupons.... etc, etc. etc... Be Creative!
This may seem like a lot of sacrifice but if you have a BIG enough WHY, then it'll be worth it to you and your family in the end. I hope this helps some families out there that have dreamed of owning their own HOME. Getting to the point of Home Ownership is not easy, but it is quite SIMPLE.
Disclaimer: I am not a Lender nor do I work for a lending institution. I am merely a Realtor spreading seeds of hope because everyone deserves to be a homeowner. I help people Buy, Sell, and Invest in Real Estate.
"Home is a name, a word, it is a strong one; stronger than a magician ever spoke, or spirit ever answered to, in the strongest conjuration." -Charles Dicken
Happy Day,
Vanna- Homes By Vanna Team
Anchorage, Alaska Real Estate Specialists
Cell phone: 907-720-4663
Office Phone: 907-865-6411
e-mail: Realty@HomesByVanna.com
website: www.HomesByVanna.com
