Home Buyer Tips On Qualifying For Mortgage Loan

Gustan Cho Associates are mortgage brokers licensed in 48 states

In this article, we will discuss and cover home buyer tips on qualifying for a mortgage loan. Whether you are living with family or renting, the 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 has many benefits. Renters are not tied down where they can move when their lease is up. Being a homeowner requires you to prep your home in order to list it on the market. It can take several months before your home closes.

Benefits of Homeowner Versus Renter

Benefits of Homeowner Versus Renter

There are pros and cons to both being a renter and a homeowner. However, if you intend in staying in 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. In this article, we will discuss and cover Home Buyer Tips On Qualifying For Mortgage Loan.

Choosing The Right Lender

One of the best Home Buyer Tips that I can give for first-time homebuyers 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. It is not like just giving the home seller the money and getting the keys. The mortgage process can be very complex and confusing. One of the best home buyer tips that I can give anyone is choosing the right lender.

Borrowers Beware With Lenders With Overlays

Not all lenders have the same credit qualification requirements. This is because most lenders have investor overlays. What overlays are is the lender’s own lending requirements that are above and beyond the mortgage loan program’s minimum mortgage guidelines. For example, HUD requires a 580 minimum credit score to qualify for a 3.5% down payment home purchase. However, most lenders require that borrowers have 620 or 640 FICO credit scores. These higher credit score requirements by the lender are called overlays. There are lenders like myself who have no overlays on government and Conventional Loans.

Typical Lender Overlays For Bad Credit Home Loans

However, almost all banks and mortgage lenders will have overlays on the following:

  • Credit scores
  • Debt to income ratios
  • Collection accounts
  • Charge off accounts
  • Credit tradelines requirements
  • 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. Need to have a mentality set on being a homeowner. Decide whether it is the right time for you to become a homeowner. As a homeowner, you will no longer have the landlord to depend on for the following:

  • Cannot count on your landlord for repairs
  • You will need to maintain your home
  • Landscaping and snow plowing is the responsibility of a homeowner
  • Cannot easily pack up and move anytime you wish

Advantages Of Owning Versus Renting A Home

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
  • Renters will never recoup their rent payments
  • With homeowners, part of the monthly mortgage payment goes towards paying down the principal payment
  • Mortgage payments, over time, will reduce the balance of the mortgage loan balance
  • Coupled with the chances of the home appreciating in value over the years, homeowners will develop equity in their home
  • After the term of a mortgage loan, homeowners 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 homebuyers 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 buyers do not need a lot of money to become a homeowner. Potential buyers 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 a homeowner can be simple. With renters, many landlords will require first-month rent, last month’s rent as the security deposit

Here is a case scenario:

  • If renting a $1,500 per month home
  • that is $3,000 as a security deposit plus the first month’s rent of an additional $1,500
  • this is for a total of $4,500 you need to come up with to get keys to a new rental

HUD requires a 3.5% down payment for a home purchase loan:

  • Buyers can get a conventional loan with a 3% down payment for first time home buyers

If you were to purchase a $100,000 home:

  • would need to come up with $3,500 for an FHA loan as the down payment
  • $3,000 down payment on a conventional loan

Home Buyer Tips With Covering Closing Costs

The first mortgage payment would not start until 2 months after homeowners move into a new home. There are closing costs associated with a new home purchase. However, home buyers do not have to worry about closing costs. This is because you can get a seller concession to cover closing costs or a lender credit to cover closing costs. On a $100,000 home purchase with either a 3.5% down payment or a 3.0% down payment, your mortgage payment will be around $500 per month. Need to add property taxes, mortgage insurance, homeowners insurance on top of principal and interest payments

Still, in this case scenario:

  • the total monthly mortgage payments along with mortgage insurance, property taxes, and homeowners insurance, the 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.

Home Buyer Tips With Freedom Of Owning Versus Renting

One of the major negative factors in being a renter is that the home is not yours. 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 wallpapering it, you would need permission from the landlord. If you were to get a new dog or cat, the landlord may not allow it. If you were to change appliances, would need permission from the landlord. If you were to plant a garden would need permission from the landlord. You are not secure in being for your lease to continue year after year. The landlord can always decide not to renew the lease. The landlord can ask you to move out when the lease expires. Rents can increase year after year. If you are a homeowner, your mortgage payment will stay the same. The list can continue on and on

Home Buyer Tips Versus Benefits Of Being A Renter

One of the major benefits of being a renter is landlords are responsible for maintenance such as the following:

  • HVAC repairs
  • plumbing leaks
  • electrical problems
  • leaking roofs
  • malfunction of appliances
  • snow removal
  • landscape services

Renters can always not renew their lease and decide to move when their lease expires. Renters can move without the hassle and time and stress of listing their homes and selling their homes which can take months.

Home Buyer Tips On Qualifying For Mortgage Loan

Home Buyer Tips On Qualifying For Mortgage Loan

One of the greatest concerns homebuyers have, especially first-time homebuyers is that they believe they need great credit and a large down payment to qualify for a mortgage loan. This is not the case as long as borrowers have a stable income. Prior bad credit with outstanding collections and charged-off accounts does not disqualify borrowers. Here are the basics of qualifying for a home loan:

  • Homebuyers can qualify for a mortgage with a low down payment, prior bad credit, and low credit scores.
  • Getting a mortgage has never been easier
  • As long as borrowers have documented income, they will qualify for a mortgage loan
  • Many lenders like myself specialize in home loans with bad credit

Home Buyer Tips: Qualifying For A Mortgage With The Best Lender

Gustan Cho Associates Mortgage is licensed in multiple states with zero lender overlays on government and conventional loans. The team at GCA Mortgage can help first time home buyers with the following:

  • No Mortgage Lender Overlays
  • Most of our loans close in 21 days or less
  • Borrowers do not have to pay off outstanding collections and charge offs to qualify with Gustan Cho Associates
  • Gustan Cho Associates has no lender overlays on government and conventional loans
  • The minimum credit score to qualify for FHA and USDA loans is 580
  • No credit score requirements on VA Mortgages
  • Can qualify for home loans with prior bankruptcies, open collections, charge offs, late payment history, and short term the job

Please contact Gustan Cho Associates Mortgage at 262-716-8151 or text us for a faster response. Or email us at [email protected]  We are available 7 days a week, in late evenings, and on holidays to answer your phone calls. Many renters do not realize that they are qualified to become homeowners.