WHAT EVERY FIRST TIME HOME BUYER SHOULD KNOW – What Lenders Look for in Home Loan Applications
You’re considering buying your first home but do you know what is going to be important to your lender in approving you for loan?
All lenders are trying to determine your willingness and ability to repay the loan you have applied for. This is what you will hear referred to as UNDERWRITING, your loan officer will complete an application and ask you for all sorts of paperwork, some of which you may wonder if he’s really sane.
This series of posts is to help you understand the foundation of a good loan application. Many people think we are in a buyer’s market but the fact is we are in a LENDER’S market. Lenders own most of the properties for sell and they set the rules (guidelines) for those that want to buy them, unless of course you’re paying all cash.
Picture a CHAIR, sitting on four legs. Loans used to be much simpler. Picture a big ol’ cushy bean bag chair and you plop yourself into it and it molded itself around you. Loans were the same way, you would provide your financial information and a loan could be found for you. NOT ANYMORE!
Now everyone’s CHAIR is pretty much the same and you have to fit the chair rather than the chair fitting you.
In order for this chair to support you (and your loan), all four legs have to be sturdy and solidly on the ground.
The four legs of the chair are Credit History, Assets, Income, Reserves .
CREDIT HISTORY- It’s more than your credit score!
This is a review of your willingness to repay the mortgage. If you haven’t paid your Visa bill or student loans you might be hard pressed to convince the lender you will make their payment. If you had past credit problems but have since “righted the ship” you aren’t doomed to float in the netherland known as renter!
A lender will review your entire credit history, giving the most recent weight to the last two years.
Your FICO score is just one factor in Credit History. Many loans are approved with credit scores less than 600 and credit scores over 700 don’t guarantee an approval for a First Time Homebuyer.
If you have current derogatory credit items take the time and bring them current or get them deleted. If you feel intimidated dealing with your creditors use a Credit professional. It may cost you a little but what it will save you on the interest rate for your home loan is well worth the investment. Many credit repair companies specialize in First Time Homebuyer Assistance. I’m constantly amazed by how unaware consumers are about their credit profile and how much money it costs them. Your mortgage professional can give you an assessment of what needs to be done (if anything).
Tags: first time home buyer credit, first time home buyer loans, First Time Home Buyers
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