Most home buyers will need to get a mortgage to finance the purchase of a home. For most Americans, their home is their largest asset as well as their largest debt. Mortgages help people purchase homes they otherwise would not be able to afford. When applying for a home loan, it is advisable to contact a mortgage lender who can help in explaining the documents and information needed for a home loan. This is where Bad Credit Mortgage Lenders can help.
It is wise to prepare yourself for a mortgage even a few years before applying for a home loan. There are many things needed for an applicant to qualify for a mortgage including stable income and employment history, good credit, and money saved for a down payment. The down payment alone may take a while to save up for. You should also make sure that you budget your income wisely, so that you will be able to repay a mortgage when the time comes.
Lenders want to make sure that borrowers can demonstrate that they have a stable income. Because of this, most lenders prefer to give loans to buyers who have had the same employer or have worked in the same industry for at least two years. Having a two year history with the same employer shows that you have achieved relative stability, and that you have the potential to increase your income in the future. Try to avoid moving from job to job as much as possible at least a couple of years before you apply for a mortgage.
Borrowers who are self-employed should have verification of their income. If you are self-employed, make sure that you have your tax returns for at least the past two years to demonstrate consistent income. You may need to have additional documents to support your income since it can be difficult for self-employed borrowers to show a stable employment history.
You will want to have the best credit score you can before filling out a home loan application. Order free copies of your credit reports to make sure there are no red flags or errors. Pay as much of your outstanding debt as possible, and avoid opening any new accounts within two years of applying for a mortgage. These steps can help you find the best deal possible on your home loan.
Lenders usually prefer to give loans to buyers that have money for a down payment. 20% is the standard down payment amount for most lenders. If you able to put 20% down on a home, you will not have to make private mortgage insurance payments (PMI). You can save hundreds to thousands of dollars by foregoing mortgage insurance payments.
To find out what you can really afford when it comes to monthly mortgage payments, you can begin setting money aside each month for two years before taking out a home loan. For instance, if you pay $900 a month for rent, and your projected monthly mortgage payment comes out to $1300 a month, then you should put aside $400 each month towards your mortgage fund. This can help you get used to setting aside the necessary amount of funds to make a mortgage payment. If you can manage to set aside this money every month, then you’ll know that you can really afford the payments.
Many experts also recommend setting up a nest egg before taking on a mortgage. This can be beneficial for several reasons. If you fall ill or lose your job, you will still able to make your payments until things go back to normal. Another reason to have money set aside is for repair bills, emergencies, and other costs required to upkeep your home. Many mortgage loan experts advise that you set aside 6 months of earnings.
Once you are ready to apply for a mortgage, make sure to bring the following items to your mortgage lender: