Home Buyer Tips On Qualifying For Mortgage Loan
This BLOG On Home Buyer Tips On Qualifying For Mortgage Loan Was Written By Gustan Cho NMLS 873293
Home Buyer Tips: Whether you are living with family or renting, your housing situation is not permanent until you own your own home. Nothing is wrong with living rent free with family or friends or renting an apartment or home. Renting an apartment or home have many benefits. You are not tied down where you can move when your lease is up. Being a homeowner requires you to prep your home in order to list it on the market and it can take several months before your home closes. There are pros and cons with both being a renter and a homeowner. However, if you intend in staying at a particular neighborhood for at least five or more years, you should consider being a homeowner versus a renter. If you intend on moving every year or two to different areas or out of state, being a renter may be the best advantage.
Choosing The Right Lender
One of the best Home Buyer Tips that I can give for first time home buyers is that education is the key. The home buying process can be overwhelming because it is not like any other purchase you are making or will make. A home purchase is probably the biggest investment you will make in your lifetime and it is not like just like giving the home seller the money and getting the keys. The mortgage process can be very complex and confusing and one of the best Home Buyer Tips that I can give anyone is choosing the right lender. Not all lenders have the same credit qualification requirements because most lenders have lender overlays. What overlays are is the lender’s own lending requirements that is above and beyond the mortgage loan program’s minimum mortgage guidelines. For example, FHA requires a 580 minimum credit score to qualify for a 3.5% down payment home purchase. However, most lenders require that borrowers have 620 FICO or 640 FICO credit scores. This higher credit score requirements by the lender is called a lender overlay. There are lenders like myself where we have no overlays on government and Conventional Loans. However, almost all banks and mortgage lenders will have overlays on the following:
- Overlays on credit scores
- Overlays on debt to income ratios
- Overlays on collection accounts
- Overlays on charge off accounts
- Overlays on credit tradelines requirements
- Overlays on verification of rent
Negatives Of Owning Versus Renting A Home
Becoming a homeowner may sound like a major responsibility, however, it is not as bad as it seems. You need to have your mentality set on being a homeowner and decide whether it is the right time for you to become a homeowner. As a homeowner, you will no longer have your landlord to depend on for the following:
- You cannot count on your landlord on repairs
- You will need to maintain your home
- Landscaping and snow plowing is your responsibility as a homeowner
- You cannot easily pack up and move anytime you wish
Advantages Of Owning Versus Renting A Home
A person’s home is most people’s biggest investment. Here are Home Buyer Tips on the positives of being a homeowner versus a renter:
- When you are renting a home, the rent you pay is an expense and you will never recoup that.
- If you are a homeowner, part of your monthly mortgage payment goes towards paying down your principal payment which over time will reduce the balance of your mortgage loan.
- Coupled with the chances of your home appreciating in value over the years, you will develop equity in your home.
- After the term of your mortgage loan, you will have a home that is free and clear of any mortgage.
- Many times, a renter’s monthly rent payment is the same as their monthly mortgage payment would be if they were to own a home.
- Home Buyer Tips that I can give all potential home buyers is that many times, being a homeowner can cost less than the current rental payment.
Making The Move From Renter To Homeowner
Another Home Buyer Tips is that you do not need a lot of money to become a homeowner. You can do a comparison of how much it takes to rent a home and compare it to how much you need to own your own home.
- There are low down payment mortgage loan programs available, converting from being a renter to homeowner can be simple.
- If you are a renter, many landlords will require first month rent, last month rent as security deposit.
- If you are renting a $1,500 per month home, that is $3,000 as security deposit plus your first month’s rent of an additional $1,500 for a total of $4,500 you need to come up with to get keys to your new rental.
- FHA requires a 3.5% down payment for a home purchase loan and you can get a conventional loan with 3% down payment for first time home buyers.
- If you were to purchase a $100,000 home, you would need to come up with $3,500 for a FHA loan as your down payment and $3,000 down payment on a conventional loan.
- Your first mortgage payment would not start until 2 months after you move into your new home.
- There are closing costs associated with a new home purchase, however, home buyers do not have to worry about closing costs because you can get a sellers concession to cover closing costs or lenders credit to cover your closing costs.
- On a $100,000 home purchase with either a 3.5% down payment or 3.0% down payment, your mortgage payment will be around $500 per month. You add property taxes, mortgage insurance, homeowners insurance on top of your principal and interest payments.
- Still, on this case scenario, your total monthly mortgage payments along with mortgage insurance, property taxes, and homeowners insurance, you proposed mortgage payments should be less than $1,000 per month which is substantially less than the $1,500 per month rental payments.
- This is only a case scenario for illustration purposes but there are many cases like these where the new home payment is either less than the rental payment, similar to the monthly rental payment, or slightly over the current monthly rental payment.
Freedom Of Owning Versus Renting
One of the major negative factors in being a renter is that the home is not yours and you need permission to do anything to the property.
- For example, if you were to want to decorate your home by painting it an odd color or wall papering it, you would need permission from you landlord.
- If you were to get a new dog or cat, your landlord may not allow it.
- If you were to change appliances, you would need permission from your landlord.
- If you were to plant a garden, you would need permission from your landlord.
- You are not secure in being for your lease to continue year after year.
- Your landlord can always decide not to renew your lease and ask you to move out when your lease expires.
- Your rents can increase year after year where if you are a homeowner, your mortgage payment will stay the same.
- The list can continue on and on.
Benefits Of Being A Renter
One of the major benefits of being a renter is that your landlord is responsible for maintenance such as HVAC repairs, plumbing leaks, electrical problems, leaking roofs, malfunction of appliances, and snow removal as well as landscape services. You can always not renew your lease and decide to move when your lease expires without the hassle and time and stress of listing your home and selling your home which can take months.
Home Buyer Tips On Qualifying For Mortgage Loan
One of the greatest concerns home buyers have, especially first time home buyers is that they believe that you need great credit and large down payment to qualify for a mortgage loan. This is not the case and as long as you have stable income but prior bad credit, you can qualify for a home loan.
Here are the basics in qualifying for a home loan:
- Home Buyers can qualify for a mortgage with low down payment, prior bad credit, and low credit scores.
- Getting a mortgage has never been easier.
- As long as you have documented income, you will qualify for a mortgage loan.
- Many mortgage lenders like myself specialize in home loans with bad credit.
The Gustan Cho Team at CrossCountry Mortgage Inc. NMLS 3029 is a national mortgage lender licensed in 50 states with no lender overlays and can help first time home buyers with the following:
- No Mortgage Lender Overlays
- Most of our loans close in 21 days or less
- You do not have to pay off outstanding collections and charge offs to qualify with The Gustan Cho Team at CrossCountry Mortgage
- CrossCountry Mortgage has no lender overlays on government and conventional loans
- Minimum credit scores to qualify for FHA Loans and VA Loans is 580 FICO
- You can qualify for a home loans with prior bankruptcies, open collections, charge offs, late payment history, and short term on the job.
Please contact The Gustan Cho Team at CrossCountry Mortgage at 262-878-1965 or text Gustan Cho on his cell for faster response at 262-716-8151 or email us at email@example.com. We are available 7 days a week, late evenings, and holidays to answer your phone calls. Many renters do not realize that they are qualified to become homeowners.