How To Qualify For a Mortgage

As you start the mortgage application process, your mortgage loan lender/broker will require that you provide the following information:

•  Employment and Income. This includes paystubs, W-2s or 1099s, and proof of income. Your income will determine the type of loan and the amount the lender will lend you.

•  Credit Score. Your loan originator will ask your permission to view your credit score. Typically, you need a credit score of 640 or higher for a home loan, but some lenders and loan types will allow a lower credit score. If your credit is in need of repair, a loan officer can provide you with free advice on how to repair your credit score. Working with a good local mortgage broker can make all the difference in the world. We highly recommend working with a local mortgage broker not a lender or online lender.  

•  Assets and Cash Reserves. This can be found on your bank statements and investment account statements. Your lender will want to know what assets you own and if you have any cash saved. It is okay if you do not.

•  Debt-to-Income Ratio (DTI): DTI is your total monthly expenses divided by your total monthly income before taxes. Lenders will calculate this to determine if you’ll have the funds to repay the loan. Lenders typically require a DTI from 36% to 43%. The question the lender will be looking to answer is

•  Property Type. The type of property you plan to purchase, such as a single-family home, multifamily, condominium, co-op, or manufactured home will determine your eligibility to buy. The loan type and the amount you qualify for will determine your eligibility to purchase various types of real estate.

•  Down Payment. This is the amount of money that a homebuyer or property buyer “puts down” to secure the loan or reduce their interest rate. Typically the more you put down the lower your interest rate ue to the type of loan you qualify for but there are home loans available to Mississippi homebuyers that require $0 down or as little as 3.5% down. Example: 3.5% down to purchase a $230,000 home is $8,050

•  Home Appraisal. Your lender will require that you hire an appraiser to determine the market value of the home. If the home does not appraise for the price you offer to the seller, the seller will have to reduce their price, or you will have to put down more funds for the loan to close. If you cannot put down more funds and the seller will not reduce their price, the contract will be voided.

•  Home and Flood Insurance. The cost of insurance can greatly decrease the affordability of a home by increasing the monthly cost to purchase a property and may keep you from qualifying to purchase the property.

•   Mortgage Insurance. Conventional loans with less than 20% down require PMI be paid as part of the monthly mortgage payment to protect the lender if the borrower fails to repay the loan. With a down payment of 20% lenders won’t charge PMI on a new mortgage.

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Important Homebuying Tips

View Properties That Fit Your Budget

Everyone hates to waste time, and spending hours or days viewing homes that don’t fit within your budget is not only a waste of time, but it can be a huge disappointment. Finding out that you can’t qualify for the home you have your heart set on can be a real letdown. On the other hand, if you are able to qualify for more than what you think, you may be selling yourself short and settling for something that isn’t quite what you want. This is one reason why it is important to get preapproved for a loan before you begin your home search. Another reason to get preapproved first is that many sellers in today’s market will not allow buyers who have not been pre-approved to view their home. Most homes on the market today are owner occupied and homeowners do not want to reschedule their daily lives around buyers who are “just looking”. In the eyes of many sellers, a buyer who hasn’t taken the most important initial step in the purchase process, probably isn’t serious. Today’s sellers are also aware that there are criminals who pose as buyers and will use showings as an opportunity to “scout out” things like the level of security, types of valuables in a home and the presence of a guard dog.  It’s an ugly truth, but many wary home sellers are being more cautious, and want assurance before they will let just anyone enter their home. Obtaining a letter of pre-approval from a lender will go a long way towards that end and also ensure there isn’t a delay when you are ready to view a home you’re interested in seeing.

View Properties You Love

Make a list of what is most important to you. Write down the attributes of your future home and stick to your list. Do you need a big backyard? Four bedrooms? Single story home? Make sure you know what is most important to you before you start your search. We also recommend, if you can, riding around the neighborhood of homes you are interested in prior to viewing them. The neighbors of a property are just as important as the house itself.  

Make An Offer Quickly

Most sellers will require a buyer to produce a pre-approval letter before any offer will be accepted. We have often found ourselves working with buyers who find the “perfect home” but their offer isn’t taken seriously or accepted due to a lack of preparation AKA not having their pre-approval ready. We have seen clients miss out on homes they have fallen in love with because another buyer who has a pre-approval makes an offer while our client waits to get theirs. In other cases, we have seen buyers get stuck awaiting pre-approval, leading to a multiple offer situation. A lack of preparation can cost you valuable time and allow other buyers to view and present an offer while you are forced to wait…  

Be Comfortable With The Payment 

A lender can give you a very close estimate of what your monthly payment will be depending on several different factors, such as the loan amount, loan type, your credit score, interest rate, insurance cost and the amount of years you finance the home. 

Choosing A Lender

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No matter if you’re a first-time home buyer or if you’re buying your 100th property, choosing the right lender is one of the most important steps of the home-buying process. Not only are comparing rates and lender fees extremely important, but finding a local mortgage broker who understands the nuances of buying a home on the MS Gulf Coast can make all the difference in your experience and whether or not you get the home you want.

Many if not most banks and credit unions are considerably slower when it comes to the closing process and good luck getting one of them to answer the phone after hours or over the weekend. Once you are under contract, there are many tight deadlines to meet throughout the contract. It is in your best interest to hire someone who is motivated to meet those deadlines in a timely manner or your closing process is likely to be much more stressful than it needs to be or you could lose the home of your dreams due to missing important deadlines. The biggest difference between a bank’s mortgage lender and a local mortgage broker is a lender gets paid hourly no matter if your home loan closes and a mortgage broker has a higher education and only gets paid if your home loan closes.

 In our experience, even clients with longstanding banking relationships have frequently received poor service and are displeased with their bank by the end of the transaction. Feel free to ask us for more details or follow the link for our approved vendor list.  We are happy to get you going in the right direction!