For people who are looking to buy their first home, getting prepared is important. There are many people who would like to be able to buy a home. In fact, most people who rent an apartment pay almost as much or more than a mortgage would cost. However, the process of buying a home and the criteria to be accepted by a mortgage company is complex. Mortgage companies and banks are typically looking for important safeguards from borrowers before they are willing to give out a mortgage. While a home mortgage is secured by the value of the home, market shifts can bring housing values down significantly after markets experience over-inflation.
That is why most mortgage companies and banks find it critical to lend to people who are more financially solvent. There are important ways first time home buyers can ready themselves for a home purchase and protect themselves from potential financial risks.
Mortgage companies and banks are usually looking for four major safeguards in lending. Borrowers should have the following: good credit scores, good employment and income sources, good employment history, and a 5-10% down payment.
Good Credit Scores and Employment and Income Sources
People who are looking to borrow a sizable amount of money such as a mortgage, must show a pattern of good payment history and borrowing habits. This lets lenders know the person taking the loan have a positive borrowing record. Good employment and income sources are a very important factor for lenders. They want to see that the borrower makes enough money to sustain a mortgage payment. They also want to feel comfortable that there will be steady employment to secure payments long-term.
Good Employment History
Banks and Mortgage companies are looking for safe investments. People who change jobs frequently can be a risk for lenders. This is because it shows a pattern of potential income loss. Even if a person has changed employment two or three times in six years and is always increasing their income it can be problematic. The trend to change employment frequently can make lenders nervous. While some lenders with higher rates may offer a mortgage under these conditions, lenders with the lower interest rates and better terms are usually leery of this.
Down Payment of 5-10%
This can be vital to ensuring a loan gets approved. Having a good down payment lets a lender know the buyer has a vested interest in the home. This is an important aspect of borrowing. Additionally, lenders want to not be liable for the total debt. This can be especially important if the market shifts downward or the property owner has latent property maintenance issues they have not tended to. The good news is that new home buyers looking for single family homes montgomery pa have a good amount of properties to choose from. However, before even looking at a home it is advisable to get pre-qualified for a mortgage loan.
Mortgage lenders and banks do offer a pre-qualification process free service to potential first-time home buyers. Getting pre-qualified is an important first step towards the purchase of a first-time home. Taking steps towards being prepared and understanding the process better, will enable you to anticipate costs more accurately. The prequalification process helps buyers know exactly what they can afford in a home and what amount they will likely be approved for.