Keys To Qualify For A Home Purchase Loan:
What You Need In The Current Market
With home prices having decreased significantly, rising rents and the lowest interest rates in a generation, home affordability has dramatically increased and once again makes more sense for many potential buyers.
As a result we have seen a tremendous increase in the amount of new buyers ready to purchase a home now. However, the main question that many of them have is what do I need, in order to be able to purchase a home in the current market? This answer will vary slightly, but here are a few things that everyone will need to be able to qualify for a home purchase currently. This is a good starting point to gauge your ability to purchase now or you need to get a few things in line before you make the move.
1) DOCUMENTED INCOME: In the current marketplace you will need the ability to document your income. If you work a regular job where you receive hourly or salaried pay, one month’s pay stubs and your last 2 years W-2’s will suffice. If you are self-employed or receive commissions as part of your salary, then expect to have to provide your last 2 year’s full tax returns. The bottom line however is that in the current market lenders will want you to be able to document and fully prove any income you state you receive.
2) 620 Credit Score: While credit standards are still more lenient on programs such as FHA financing or VA financing for Veterans as opposed to conventional financing, the minimum is now a 620 credit score. This is a practice that many lenders have implemented and will soon be an across the board requirement. If you score is below this level, you will be best served to begin the process of evaluating and repairing your credit score, prior to being able to purchase a home.
3) DOWN PAYMENT: While there are a select few programs that will allow for 100% financing (Veterans Administrations Loans, USDA Rural Housing), the majority of all purchase loans will now require a minimum of a 3.5% down payment for FHA financing or 5% for conventional financing. This number increases if the property is a second home or investment property. Therefore, down payment must be saved up for most buyers prior to purchasing a home, but there are many options that can help minimize that amount.
With home buying on the rise, these are just some of the many items to consider when purchasing a home and qualifying for a home loan in the current market.