Real Estate prices are down, interest rates are at record lows, you’ve found your perfect Silicon Valley Dream Home but you still have 1 hurdle to cross; Financing
Don’t sit on the sidelines assuming you can’t buy because you can’t get a loan. Here are 5 things the lenders are looking for in order to approve that home loan.
1. The Down Payment. While 20% down is preferable, don’t count yourself out if you don’t have it. You can still finance up 95% conventionally and up to 96.5% through FHA loans. There will be additional cost associated in the form of mortgage insurance but this may still end up being financially better than continuing to rent or stay in your current home.
2. Job History. Banks want to know that you have the ability to remain in the home and make the payments. Job History will be vetted carefully looking for career changes and earnings continuity. Short periods of unemployment shouldn’t affect you too negatively.
3. Debt. Banks want to know that you can comfortably afford to pay ALL your debts, not just your mortgage. Debt to income ratios vary but typically your total monthly debt should not exceed 41% of your income.
4. Credit Score. FICO scores range from 300 to 850. Lenders typically look for 640 and above with higher scores lowering the costs. FHA will consider borrowers with lower scores.
5. Paperwork. Gone are the days of the no doc loan frenzy. Lenders want to see paperwork to support your income and assets. That means paystubs, tax returns, account statements etc.
Talk to a reputable lender to find out what is available to you. Contact us for a referral.
Based on an original column by Candice Choi.