Securing Your First Home Loan: Ask Yourself These Questions

There are a number of questions that you should ask yourself before investing time and energy in applying for a home loan. First-time home-buyers typically pick out their houses before ironing out their financial background. The first point of contact should be to your loan officer. But before even doing that, it’s a good idea to sit down and do some hard thinking. Before applying for your first time home loan, ask yourself a few questions.

What is the Benefit of Purchasing a Home Instead of Renting One?
Purchasing a home is an investment. When you rent a home, you are essentially paying someone else to live in his or her quarters. When you purchase and own your own home, you can deduct mortgage costs from your federal income taxes, with some states allowing you to also deduct mortgage loan interest from your state taxes. This will allow you to save money each year. Usually, the value of a home will also increase over time.

I Have Less than Perfect Credit; Do I Have a Chance of Purchasing a Home?
The criteria for obtaining a home loan are more stringent than ever before. The recession and the home buying market have created a crunch for many first-time home-buyers, but you may still be able to secure a home if you are a good candidate for any of the federal mortgage programs offered by the government. The FHA Back to Work Program is available for both returning and new home-buyers. You can also contact your local government to see if there are any local home buying programs that caters to the community.

How Much Home Can I Actually Afford?
It may be a bit hard to figure out how much you can actually afford. The best ratio is to have approximately one fourth of your income going toward the payments of your home. However, not everyone may have this luxury. Anything between 25 and 35% is typically okay for most loan criteria. However, if more than 35% of your income is required to pay off any house payments, you might want to rethink your target price to ensure you are able to maintain payments on a new home. Putting a sizable down payment on your first home loan has several benefits as well. You will enjoy lower monthly costs since you paid a portion of the home loan in the beginning and you become a more attractive candidate for a loan since you have shown good financial responsibility in your past.

To learn how you can secure your first home loan, contact us. We pride ourselves on helping new home-buyersnavigate the home loan process with integrity and honestly. Having a loan officer at your side that you trust is so important in this process and we will make sure you have the confidence that we will always put your first.


The Best Home-Buyer Mortgage Loans Require Satisfactory Credit

How to boost your credit for new home-buyer loans

If you’re hoping to join the Federal Housing Administration’s Back to Work program for the best home mortgage loans, satisfactory credit is required to be eligible. This means your credit history must be clear of late housing, installment debt payments, delinquency and other derogatory credit issues.

What is a credit score?

A credit score is a number ranging from 300 to 850 that shows your potential and financial worthiness to potential lenders, landlords, insurance companies and banks. The score is determined by your payment history, amount of debt, length of credit history, recently opened accounts, utilization of credit and available credit. Payment history makes up 32 percent of an overall score, which is the largest portion and most important.

The higher the score, the more creditworthy you are. This shows lenders you have a higher chance of repaying your loans on time. There are two different kinds of credit: revolving (credit cards) and installment (student loans, auto and mortgages). Both kinds contribute to your overall score. Credit scores below 500 are not eligible for Back to Work’s new home-buyer loans. Borrowers with no credit score remain eligible.

How do I raise my credit score?

Making payments on time is the biggest contributing factor to a credit score. The longer you pay your bills on time, the more your score will increase. If you pay bills online, set up payment reminders with your bank that will automatically send you a text message or e-mail alert to remind you of your bills’ due dates. If you owe a bill that is consistently the same amount each month, set up an automatic payment. Your personal banker can help you set up reminders and automatic payments if you are unfamiliar with online banking.

If you haven’t already had a successful installment loan, like a student loan, consider taking out a small loan from a community bank that you are positive you can pay back over time. This can dramatically increase your credit score and prove your creditworthiness.

Paying off credit cards is easier said than done, but it’s another huge contributing factor to credit scores. To begin, pay down cards that are closer to their limits first. Lenders like to see balances below 10 percent of the card’s limit. Just like with bill reminders, you can set up e-mail or text message reminders that will alert you when you’re approaching the limit you have set.

The Back to Work program requires at least twelve months of a clear credit-history report. There is no quick fix to bad credit, but paying monthly bills and paying off cards will boost your credit score over time, and get you back into home-buying shape.