Qualifying as a first-time homeowner brings you closer to your dream of owning a home. It positions you to benefit from the various programs that may speed up the process. If you had owned a home in the past, you could still qualify for these opportunities. Prospective homeowners must not have bought property within the last three years. If you once owned a home but are now renting, you could be eligible. Below is how to qualify as a first-time homeowner:
Improve Your Credit Score
You need to pull your credit report before you approach any lender. Such a step allows you to see any negative information and work on it. Look keenly at your report. Are there any erroneous items? Improve your credit score. If you wish to qualify for any of the federally backed programs, aim at a score of 500 and above.
Gather all personal information concerning debts and other obligations. Collect documents on your car and student loan payments. Make copies of court orders regarding payments for spousal or child support. Lenders may feel a little comfortable if your current payments are up to date.
Get bank statements for the last three months. Have with you a few of the most recent pay stubs. Gather Income tax returns covering the previous two years. If you have been receiving regular child support or alimony, prove it through relevant documentation. The lender uses income-to-debt ratio to determine whether you can pay the home loan.
You Need to Have the Down Payment
Certain programs require zero down payment. Many first-time homeowner programs require you to raise 3–10 percent down payment. You should be able to show that you hold the down payment. The funds should have remained in your account for a minimum of the last three months. Perhaps your family intends to give you the funds for the down payment. In this case, you need to provide proof of assets and a letter stating that fact.
Try the Government
There are times you might not find a lender willing to approve your loan. In such a situation, consider getting a Federal Housing Administration loan. FHA backs the mortgages of many first-time property buyers. With an FHA guarantee, your chances of getting bank approval improve.
Buying your first home naturally excites you, but it can also be stressful. Having all the relevant documents ready for presentation to the lender can reduce your anxiety. Providing all the required information makes it easy for the mortgage lender to make a decision. A home loan is a long-term commitment. If you do not feel optimistic about your current job, delay the decision. Sometimes, renting can be a better idea.