Prepare Immediately for Rent to Own Victory!
An estimated 50% of people that once qualified for a home loan no longer do due to tightened lending guidelines. If you are among this group, you understand that just because your credit may be less than perfect, doesnt mean that owning a home is not important to your family.
Many people consider a good option to conventional financing to be renting to own or lease purchasing a home.
If you are serious about buying a home, this can be a good option. However, if you dont start doing what it takes to qualify for a mortgage at the beginning if the term, a Lease Purchase can be a financial disaster.
Most everyone understands that a good credit score is the single most important factor in determining your loan approval. Unlike a few years back, in today’s economy, good income and a down payment wont overcome bad credit!
You must start repairing your credit right away! Your first step should be paying off any recent collections. You will also want to pay your credit cards down as much as possible.
Because part of your credit score comes from the percentage of revolving credit that is available, you want to have at least four credit cards that are not close to their limit. Your score will be higher if you owe $1,000 and have $20,000 available than if you owe $1,000 with $10,000 in available credit.
If you have finance company loans you will want to get them paid off as soon as possible and have the accounts closed. While bank loans reflect positively on your credit score, finance company loans will actually hurt your score. The reason for this is because most people seek out finance company loans when they are desperate for cash. The credit bureaus see these loans as a sign of financial stress.
While focusing on your credit is the first step, that isnt all you need to accomplish. What other factors will come into play when it comes time to apply for a home loan?
Other things that are important include job stability and income. Two years with the same employer is ideal. If you have changed jobs, this may be ok, provided the job changes were for career advancement.
Changes in available loan products have made it especially difficult for self employed individuals to qualify for a mortgage.
While stated income loans were once popular among self employed individuals, they are no longer available. If you are considering a lease purchase or lease option, it is important that you begin documenting your income immediately. Lenders will require at least two years of documented income.
Beyond credit and income, there are other things that can play into a loan approval. While once those who were not US citizens could qualify for a mortgage without much trouble, this has become significantly more difficult. Non-citizens should be prepared to have established credit files and significant cash down. Even then, approval is not a sure thing.
If you begin immediately working on your credit as well as other factors that will impact your mortgage approval, you can own your own home in no time!
