Basics of the Mortgage Qualification Process

The dream of owning a home. You open up your web browser and start looking at listings. You find a few in the desired area of which you are looking to plant your feet. You look at the number of bedrooms, baths, amenities such as fireplace, pool, etc. The next step is usually to check out the price and then you think about what a monthly mortgage payment would be. You then shutdown your computer and revisit this same process in the next month or so. Owning a home shouldn’t just be a dream you revisit from time to time, it is very much an attainable goal with the proper steps in place. Putting together a game plan and sticking to that game plan is very important, but first, understanding the qualification process is key.

Here are some things to know when purchasing your own home:

• Minimum credit score to qualify to purchase a home: 620 for traditional mortgage and FHA. VA Loans (military veterans) can go down to a 580 with 100% financing (no money down). Attaining a credit score of over 700 will save you thousands of dollars in the future, especially when it comes to mortgage costs and monthly payment.
• Minimum down payment for a purchase is between 3.5 – 5.0% (which is roughly the average down payment for a rent to own property)
• Monthly mortgage payments nowadays are usually much lower than rent payments.
• After filing a Chapter 7 bankruptcy, mortgage guidelines state that one cannot qualify to get a mortgage for at least 2 years from the discharge date (also, one cannot have any late payments on any accounts after filing a bankruptcy)
• After filing a Chapter 13 bankruptcy, mortgage guidelines state that one can qualify to get a mortgage 1 year after the filing date, as long as he/she is on time with the payments associated with said bankruptcy (also, one cannot have any late payments on any accounts after filing a bankruptcy)
• Mortgage guidelines state that if a person has a foreclosure on their credit, they are at minimum, 3 years away from qualifying for a mortgage, depends on the bank.
• Mortgage guidelines state that if a person has a short-sale on their credit, usually the waiting period is a minimum of 3-7 years.
• Most mortgage companies do not want to see any collections reporting on credit (even if their score is above a 620)
• Positive credit is essential. Even if one has a 620 credit score, if you do not have any positive credit history most banks will turn you down. Underwriters at banks need to determine the person’s “repayment ability”. If one has no positive trade lines, an underwriter cannot/will not sign off on a loan because they cannot verify that the person has a proven track record of paying bills on time.

The two main qualifications when purchasing a home are credit and income. Here at Cake Credit Repair we can help you meet the first qualification by helping you improve your credit. In regards to income, that is the job of your future loan officer/mortgage broker to work those details out with you. We want to start this journey with you. We work with mortgage brokers across the country always welcoming qualified buyers. If you have any questions in these regards feel free to visit our website and contact one of our Credit & Mortgage Specialists for a free consultation.