Determining whether or not you are a good candidate for a new home mortgage can be difficult if you are in the average zone in terms of credit history, income and assets. But do not worry! Let’s see what is a good candidate for a mortgage applicant.
Buying a home is one of the most important financial decisions you will ever make. It is a decision that you should not take lightly. Research, research, and shopping for different mortgage rates and lenders should be number one on your list before making any final decisions regarding your mortgage.
To get a good mortgage rate, terms, and a deal that suits your financial situation, you must have a decent financial environment. Your financial environment is a sum of all your financial transactions, such as income, expenses, short and long-term debt, credit history, credit score, and of course, assets. Together, all of these things will affect the type of mortgage you may qualify for.
The first thing to ask yourself when evaluating yourself as a mortgage candidate is whether you have liens, bankruptcies or foreclosures on your record? All of these things are unfavorable in your financial environment and automatically make you a high risk applicant.
However, if these events occurred more than seven years ago and you have done everything you can to correct the situation, then you may be in a more favorable position. Often times, it takes about seven years or a little longer for negative items to be removed from your credit report.
If you don’t have bankruptcies, foreclosures, or foreclosures, then you’re on your way to being a good mortgage candidate. If your credit score is above 600, you are definitely a good mortgage candidate!
How is your income? Is it stable or fluctuating based on the type of job you are in, or is it constantly changing jobs? Good mortgage candidates have stable employment and income. You don’t have to have exceptionally high income to be considered a good mortgage candidate. As long as it is stable, you are a good candidate for mortgages.
How are your expenses? Do you constantly spend more than you earn? Or do you save some money every month? A good mortgage candidate has extra income every month and doesn’t overspend. This leads to the next item, debt.
Are you in debt up to your ears? Do you have late payments and are barely able to pay the minimum amount each month? If you don’t, that’s great! You need to be up to date on your debt, paying it on time every month, and not be so compromised with creditors that all your money goes to a credit card or car payment every month.
Do you have any assets such as business or stock market investments? Assets strengthen your case for a mortgage by showing the mortgage lender that you will be able to pay the monthly payment even when your cash is low. If you don’t have any investment, that’s fine. It will not break your case for a mortgage. This home may be your first investment and it is definitely okay, everyone should start somewhere.
After asking yourself some of these questions, you should have a better idea of what your financial environment looks like. Your income doesn’t have to be spectacular, just constant. You can have debts, as long as you can show that you are paying them regularly and on time. This is a positive that a mortgage lender would consider when considering you for a loan.
If your expenses are a little high, see what you can do to lower them each month. You can use that extra money to save for your down payment and even get a better deal on your mortgage!
Interested in creating some assets for yourself? Then, consult a financial advisor who can point you in the right direction to take some extra money and invest it in real estate or the stock market. This is a good thing regardless of whether you are buying a home or not.
If your financial environment doesn’t look as good by this criteria, take some steps to correct it. A little planning and self-discipline can go a long way toward your finances. If you are serious about buying a home, consider fixing your personal finances before shopping for a mortgage. You will end up saving thousands of dollars in interest!
