There are 5 things to consider when purchasing a property as a first time home buyer. Before picking out your dream home, you need to know a bit about the mortgage process. The difference between qualifying for your first time home buyers loan, and not meeting just one of the qualifications, could leave you disappointed. However, there are different mortgage programs available to help you with your first home purchase.
5 Things to Consider About Your Loan
- Mortgage Program
- Down Payment
- Reserves Requirement
- Credit Criteria
- Income and Employment
Mortgage Program – The mortgage program you qualify for and choose will determine a lot about your loan. How much you need to put down, reserves requirements and necessary credit criteria are based on the mortgage program. Speaking with a mortgage banker is the best way to find out more about specific mortgage programs and qualifications.
Down Payment – Your down payment amount will be determined by your mortgage program. The lowest down payment is offered at 3.5% through an FHA loan and ranges all the way up to 10% for a traditional conforming loan. So know which mortgage program you qualify for to determine how much your down payment will be.
Reserves Requirement – Different mortgage programs require you to have a certain amount of money in the bank. This money is considered reserves to afford your mortgage loan and upgrade your property. Which mortgage program you choose will determine how much reserves you need in the bank.
Credit Criteria – Qualifying for a loan also requires you to have an established credit history. This means you must have a credit card, you must have monthly bills that you have been paying on time and you must have a certain FICO score. Your FICO score requirement depends on your mortgage program. The minimum FICO score you need to qualify for a loan is 580, this is for an FHA loan. Conforming loans require a minimum of a 620 FICO score, however, a 680 FICO score would get you a better rate.
Income/Employment – All first time home buyers a required to have a job history. This means you must have worked at the same job or in the same field for a minimum of 2 years. You will need to provide 2 years worth of tax returns to prove it. Also a 12 month rental history is required to qualify for a mortgage loan.
You may have great credit or make plenty of money. However, just one qualification requirement could stop you from receiving your loan or a better loan. Finding out which mortgage program you qualify for is important, but speaking with a mortgage banker is best. Depending on your situation a mortgage banker can help you qualify for a better mortgage program. They also have the most up to date information about these programs. Avoid mortgage brokers as they will not be able to provide you with the best information or the lowest rate.
