Buying your first home can be stressful, especially when you do not know what to expect! Be sure you work with someone who helps you throughout the process and answers all of the questions you get along the way. To help alleviate some of your stress now, we will go over some basic requirements and things to think about when it comes to buying a home. Most of these requirements are fairly easy to meet – especially if you are able to prepare for them ahead of time.
To start with, having a decent credit score to qualify for a mortgage program is something that will be looked at. You do not necessarily have to have a high score, as all loan types have different requirements. Scores between 580 and 640 are average credit score minimums. It is possible that you qualify for a mortgage with a lower score, as there are other things that are taken into consideration as well.
Having a steady income and employment may be an obvious, but necessary mortgage requirement as well. What may not be as obvious is that most lenders want you to have the same employment for a minimum of two consecutive years. If you are self employed, make sure you are able to shower a consistent amount of income for two consecutive years as well. The income amount should be stable or increasing.
Another requirement is being sure you are able to make a minimum down payment. The down payment amount will depend on the final cost of the home. There are also some lenders and programs that do not require a down payment. With down payment costs, there are also closing costs! Be sure you are saving enough money for both.
Your debt-to-income ratio will also be looked at and a factor in qualifying for a mortgage. The ideal debt-to-income ratio is 36%-43% as it depends on the loan you decide to go with.
You will also need to supply documentation to your lender to purchase a home. This documentation includes, but may not be limited to: past tax returns, past paystubs, W-2s, employment verification letter, bank statements, other asset statements, identification, rental history, etc. If you are self employed you will need to provide a year-to-date profit and loss statement.
We hope that by laying this out for you, you will be less stressed and anxious when it comes to being a first time homeowner!