5 tips for first-time homebuyers getting FHA Loans
Buying a home can be thrilling and nerve-wracking at the same time, especially for a first-time homebuyer — it’s difficult to know exactly what to expect. The learning curve can be steep, but most of the issues can be resolved by doing a little financial homework and get pre-qualified. At Benchmark Mortgage, we are here to help the First-Time HomeBuyer find the perfect FHA Loan and guide them through the entire home buying process.
Take these 5 steps to help make the process go more smoothly.
Check your credit
The homebuyer’s credit score is among the most important factors when it comes to qualifying for a loan these days.
Check your credit report for mistakes, unpaid accounts or collection accounts.
Just because you pay everything on time every month doesn’t mean your credit is stellar, however. The amount of credit you’re using relative to your available credit limit, or your credit utilization ratio, can lower a credit score.
The lower the utilization rate, the higher your score will likely be. Ideally, first-time homebuyers will have less than a third of their available credit utilized.
Evaluate assets and liabilities
Car loan and student loan payments are both factored into your debt-to-income ratio. Evaluate the payments remaining on installment debt. If these debt are paid off prior to application they do not need to be included in the debt-to-income ratio. Student loan debt will need to be considered even if you are not making payments on them currently.
A first-time home buyer should have a good idea of what is owed and what is coming in.
Organize documents
When applying for mortgages, homebuyers must document their income and taxes.
Typically, mortgage lenders will request 2 recent pay stubs, the previous 2 years’ W-2’s, tax returns and the past 2 months of bank statements — every page, even the blank ones.
Buying a home can take a long time, but knowing what you need and where to find it can save time when you’re ready.
Qualify yourself
Ideally, as a first-time homebuyer, you already know how much you can afford to spend before the mortgage lender tells you how much you qualify for.
By calculating debt-to-income ratio and factoring in a down payment, you will have a good idea of what you can afford, both upfront and monthly.
We can typically go up to 45% Debt-to-income ratio on FHA loans, but can go up to 50% and even 55% on a case-by-case basis.
Figure out your down payment
FHA loans require a minimum down payment of 3.5% of the purchase price. Makes sure you can document sufficient asset to cover your down payment. Contact me to find out “acceptable” sources of funds for your down payment. Unsecured loan funds are not acceptable, but gift funds from family members are allowed.
Contact me if you have any questions about the process of becoming a First-Time Home Buyer. I will gladly assist you with any questions, or if you are ready to get started, just go to “Apply Now” and fill out the Full or Quick Application. I look forward to working with you and I appreciate the chance to earn your business.