If you’ve never before purchased a home but you’re now ready to make that important leap, congratulations! Being a homeowner is both exciting and a source of pride. It’s also a great investment, since over time, homes appreciate in value in most markets across the nation, and certainly here in Texas.
What’s more, instead of paying rent every month and never recovering that amount, you’ll instead be paying down the mortgage, getting ever closer to owning your home free and clear and not having to make monthly payments to live somewhere.
But where do you start? How do you find out about first-time home buyer programs? How do you get yourself financially prepared so that you can qualify for a great conventional loan with appealing mortgage rates? Read on for some pointers from Manuel Mortgage.
Clean Up Your Credit
A number of people don’t qualify for a conventional loan, at least not right away, because they have a low credit score. Banks may consider someone with poor credit an unnecessary risk, and they may not want to lend to this individual.
If you find yourself in this boat, don’t despair! You can get your credit rating up, enabling you to qualify for a conventional loan sooner than you might expect.
Start by checking what your score is. Then, take concrete steps to improve it. This may involve paying all your bills on time, paying off debt, keeping balances low on your credit cards (which you can achieve by making fewer purchases and by paying more of your balance each month), and opening new credit accounts only as needed.
By developing a strategy and sticking to it, you can improve your credit score, in turn increasing your chances of getting a conventional loan from a financial institution.
Save Up For A Down Payment
To purchase your first home, you will need a down payment. Lenders often look more favorably upon borrowers who’ve saved up a good chunk of money to be able to put a significant amount down on a home purchase. This tells the lender two things: first, that you’re serious enough about buying a home that you’ve set aside a substantial amount for a down payment, and that you’re financially disciplined enough to save money (which implies you’ll be responsible in repaying your home loan).
However, be aware that in many counties here in Texas, you can purchase a home AND get a good loan even if you have a small amount for a down payment. The best thing to do is to check with mortgage specialists who can advise you regarding whether you have enough saved up for a down payment, or whether you’d be better off saving a bit more before you try to purchase your first home.
Get Your Other Finances In Order
How’s your financial health? Saving for a down payment and increasing your credit score are two important factors, but take a look at the rest of your financial picture. In fact, take a close look; what will a lending institution see? Are you a good prospect, or a high risk?
When you’re applying for a home loan, here are some documents you can bring to help you qualify.
If you’re hourly or salaried, bring all your W2 forms for the last two years, as well as your three most recent pay stubs. If you’re self-employed, and/or you run your own business, bring all schedules of the last two years of your personal tax returns, and if applicable, the last two years of your business returns.
Ask your mortgage specialist what other financial documents you can bring when applying for a conventional loan. Here are several possibilities:
- Recorded divorce decree
- Child support orders
- Military disability awards
- Pension statement
- Social security awards statement
A Stable Job Helps
As we mentioned above, bringing your W2 forms, pay stubs, personal tax returns, and business returns is important for applying for a loan. What the lending institution wants to see is a stable income, which shows that you’ll be able to make the monthly mortgage payments.
If you are self-employed or own a business, your monthly income can fluctuate greatly. What may help you get a loan in this case is bringing in your income, profit, and tax statements for the last several years to show an overall trend of making (not losing) money.
Paying Your Bills On Time Shows You’re Responsible
We’ve touched upon this point as well in the credit score section of today’s blog, but it bears repeating. Pay your bills on time, and you’ll improve your credit, reduce your debt, and show that you’re financially responsible. Lenders look favorably upon applicants who pay bills on time, since you will need to consistently pay your monthly mortgage bill by the due date.
What About Alternate Loans?
If you don’t quite qualify for a conventional loan, there may be other loan products that you may be able to get. These include:
- FHA Loans
- VA Loans
- USDA Loans
Contact your mortgage specialist to see if you might qualify for one of these specialized loan programs. With a VA loan, benefits include no down-payment required and easier qualification standards. If you qualify for a USDA loan, you can also take advantage of no down-payment being required, as well as flexible closing cost payment options, among other benefits.
Turn To Manuel Mortgage For Assistance
If you’re ready to purchase a home in Texas, turn to Manual Mortgage, your mortgage specialists. We are in a unique position to assist, since we partner with Goldwater Bank to locate some of the best conventional loans and mortgage rates available. What’s more, we have ample knowledge on many different types of loans. We can help you determine if you’re best off with a conventional loan, or if an FHA, VA , or USDA loan might serve you better. What’s more, we help existing homeowners get renovation loans for their home expansion projects; for individuals interested in building a brand new home, we can help locate new construction home loans.
Our loan services can benefit everyone from first-time home buyers to experienced investors. Get in touch with Manuel Mortgage today to get the conversation started!