First Time Home Buyer Guide To Mortgages
If you are a first time home buyer, you may not know some of the elements financial institutions look at before determining your eligibility for a mortgage. We are here to help. Any financial institution will want to make sure it will get its money back. In doing this, they take a hard look at your current and past financial situation.
Guide To What Mortgage Lenders Look At: For The First Time Home Buyer
Elements that virtually every lender takes into consideration:
- Income: You don’t necessarily have to have a large income to be approved for a mortgage; however, your income will affect the amount you can be approved for. Keep in mind that your income is the money that you receive on a regular basis, not any raise you are expecting to receive in the future. Financial institutions will take a hard look at your monthly income in relation to total monthly housing expense. In order to determine if you have sufficient income, a mortgage representative will take into consideration your income from all sources. This includes your salary, bonuses, and monthly income from dividends and interest. A guideline is to keep your monthly mortgage payment, insurance, and property taxes less than one third of your monthly income. A great tool to use to see how much home you can afford is a mortgage loan calculator. Another great tool to utilize is mortgage payment calculator to determine what you could expect your monthly payment to be depending on the loan amount, rate, and term.
- Credit Score: Your credit score is a number between 300 and 850 that helps financial institutions determine your dependability in terms of paying back debt. The higher your credit score, the better. For instance, a low credit score raises a red flag to financial institutions that you are a risky borrower. This can make it more difficult to get a loan, and can raise your interest rate if you are able to obtain a loan. Keep in mind that your credit score is made up of five key elements: payment history, capacity, length of credit history, types of credit, and new credit. For a complete breakdown of each element, click here.
- Down Payment Amount: Many financial institutions take the amount that you are able to put forth as a down payment into consideration when determining your eligibility for a mortgage. The higher amount of money that you are able to put down, the lower your interest rate could be. In addition, putting a larger amount down helps you build equity at a faster rate. Many first-time homebuyers may find it difficult to come up with the money for a 20 percent down payment, but Launch CU has you covered. We offer first-time mortgages for as little as 3% down, making it easier for you to unlock doors to your future. For more information on our 3% down mortgage program, click here.
- Current Loans: If you have additional long-term loans already, such as a car loan or a large amount of student loans, a mortgage lender will take a look at this, as it could impact your ability to make your monthly mortgage payments. Having additional loans in your name is not always a bad thing. If you have a good history of timely monthly payments, this can help add to your credibility as a responsible borrower. Your financial institution will look at your other monthly obligations to determine your ability to make your monthly mortgage payments. If you do not have much income left after paying on your other loans, it could affect your ability to get a mortgage.
Buying your first home is one of the biggest expenses you will experience. Being prepared before you meet with a mortgage representative is key. Having a good credit score, great payment history, sufficient income to cover monthly payments, and money to put down for a down payment will all work in your favor. At Launch CU we are here every step of the way, helping you unlock doors to your future for less.
© Copyright 2015 Launch Credit Union. All Rights Reserved