Mortgage money has become harder to get because of bank foreclosures that occurred as a result of the "sub-prime mortgage era." This financial slap has caused some lenders and banks to close their doors. Those that have survived are taking a much more conservative approach to all lending (not just mortgages). Guidelines have been tightened and credit is scrutinized more closely. This has had an impact on old and new borrowers, because a credit record that was passable in the early 2000s is no longer acceptable. Smart borrowers prepare before applying for a mortgage.
START WITH CREDIT
A good credit history is of utmost importance. At least 12 months prior to buying a home, tighten your self-discipline about making payments. It is imperative that your last two years of payment history be timely, but the 12 months just prior to processing a loan are crucial.
LOOK AT DEBTS:
If you are carrying debts with high monthly payments, look at the total minimum monthly payments (including your rent). Divide this by your gross (before taxes) monthly income. The result is your debt ratio, which should be lower than 40 percent of your gross income. FHA allows a little higher than 40 percent, but keeping the ratio lower is financially healthier. This debt ratio will be run again when you apply for a home loan, when it will include a monthly payment for the home, plus monthly taxes and insurance, but not your current rent payment. If your debt ratio looks too high, pay off some debts to eliminate monthly payments and decrease the debt ratios.
SAVE MONEY:
Saving money for a down payment or to pay off debt is a tough job that takes dedication and concentration. You will need down payment money when you buy a home. Even if your seller agrees to pay your closing costs, you will need funds for insurance and tax escrow. The type of loan you qualify for might require some reserves left in your bank after you close. Take a look at your spending and budget. For a week, write down every naira your spend. At the end of the week, you will find out where your small "leaks" are, which can be plugged. Some of these might be fast-food breakfasts and take outs, movie nights, and lunches out at work. Change some of your habits by buying microwaveable breakfasts. Other ways to cut the budget would be to look at your current bills. Making payments on time not only helps credit but saves late fees. Place all of your savings in an account called "home."
STRIVE FOR STABILITY
In most families, the stability of your employment is the family financial stability. If this is true for you, your job is what is used to support the debt of a mortgage. Lenders look hard at the past two years of job history when approving a loan. Hopping from one job to another in different fields is proof that a person is working, but does not prove stability. Pay increase, better benefits or location are all good reasons for job changes in your current field. Layoffs and cutbacks cannot be helped but will need to be explained.
DEVELOP A MORTGAGE RELATIONSHIP:
Realtors will not begin showing homes to prospective clients until you possess a qualification letter from a lender, so call a mortgage professional early. They will work with you to ease you through qualifying for a mortgage by giving advice and guidance. Guidelines change over time, and they will be informed. Beginning this process early will give you insight into issues you need to work on. They will know about grant money and programs to help ease you through what it takes to close on a home. Write down all your questions and call for an appointment. Let them know that you are early in the process but wish to use their services
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