Do I qualify is the biggest question for first time home buyers. Buying a house is an exciting process, but it can also be intimidating, especially for first-time homebuyers. Unless you’ve recently received a major inheritance, you’re probably going to need to get a mortgage loan. To make the application process as smooth as possible, it helps to know exactly what to expect before you begin. In this article, we’ll go over all of the mortgage loan essentials, including the down payment, credit requirements, and the documents you need to apply.
Do I Qualify: Know How Much Down Payment You Need
Down payment is a term you’ll hear thrown around a lot in the mortgage world. Essentially, a down payment is the money you’ll pay upfront for the house; the leftover balance will turn into your loan. How much is a down payment? That depends on the loan. Some lenders only ask for 3% upfront, but others require as much as 20%. Before you apply for a loan, do a little math so that you know how much liquid cash you can put forward. As a rule of thumb, don’t apply for loans where the down payment is higher than you can afford to pay upfront. Saving for your down payment can give you time to really figure out what you want in a new home.
Do I Qualify: Know the Credit Requirements
Your credit score plays a big role in determining whether or not you qualify for a mortgage. Higher credit scores mean better loans. What’s a good credit score? Qualifying minimums range from 580 to 640, but 700 or higher will get you the best results. If you’re below 580, don’t panic. Just take some time to boost your credit score before you apply for a mortgage loan. Keep in mind that credit requirements vary by loan. FHA loans will consider a 580. For a conventional loan, you’ll want a minimum of 640. Jumbo mortgages have differing credit score requirements depending on what jumbo mortgage you apply for.
Make Sure You Have All the Required Documents
When you apply for a mortgage, be prepared for paperwork—a lot of it. Banks need to feel confident that you’re a trustworthy borrower, which means seeing the documentation of your income and assets. To save yourself some time, have these documents ready to go: W2s and tax returns from the past two years, three months of pay stubs and bank statements, and a list of your assets and debts. If you’re unemployed, be prepared to provide other proof of income.
Applying for a mortgage loan can be stressful, but you can save yourself a lot of time and a few headaches by being prepared and informed. How much down payment do you need? What are the credit requirements? These questions will help you decide if it’s the right time to apply or if you should wait and prepare first. When the right time comes, you can speed up the process by having the correct documents in hand. Before you know it, you’ll be unlocking the front door of your beautiful new home.
Interested in buying a home? Read up on our tips for first-time home buyers.
Steelbridge Realty LLC is a Licensed Real Estate Brokerage that utilizes cutting-edge marketing techniques and data-driven Real Estate solutions in today’s ever-changing environment. Our group of professionals have decades of experience and have navigated through many business cycles. Our diverse background gives us the tools to guide people towards successful decisions.