Qualifying for a mortgage can prove a stressful process to the first-time home buyer, especially if they fear their credit will negatively impact a lender’s decision. Even those that may qualify for certain home loans may find that their financial history and other factors impose the risk of having a higher interest rate. As such, it is important for all prospective home owners to carefully assess their credit and follow tips to qualify for an attractive mortgage plan.
Inspect Credit Reports and FICO Score
It is important to pull information from not only one, but multiple certified credit reports. While this may seem exhaustive, gaining these reports from multiple sources can provide a more thorough comparison of what one’s true credit history entails. If one notices any major discrepancies in these reports it is best to investigate them further and resolve them if necessary.
The FICO score is also a major factor when a lender determines one’s home loan qualifications, as it provides a look at one’s ability to pay back a loan. The better a FICO score, the more trusting the lender may become. In long-term situations, individuals will benefit from improving their debt repayment by making payments on time and keeping accounts open with a zero balance.
Prepare for a Strong Down Payment
While some may qualify for loans by saving up to three percent for a down payment on a home, it is suggested to save up as much as possible before approaching a lender. Those who are able to provide a five to 10 percent down payment display more security in their ability to pay back a loan. Without a solid down payment, most credible lenders will feel that the borrower is unqualified for a mortgage due to lack of fiscal responsibility.
Provide a Steady Job History
In assessing a borrower’s financial stability and ability to repay a loan, lenders will look for a solid job history. While unemployment and job changes are factors that are not always avoidable, it is important to keep this factor in mind if one anticipates buying a home far-out in the future.
Banks and lenders will look more favorably upon mortgage applicants that display financial preparedness for certain situations in life, such as unemployment or medical issues. Those who are considering purchasing a home should first assess what their assets—essentially, items they own—are and what their collective worth is; establishing presence of these valuable resources can display a sense of collateral to a bank. If one does not have adequate assets, it is suggested to take some time to build them to solidify a monetary value that can provide at least six months of mortgage payments.