Roadmap to Homeownship
- Good Credit
- Stable Income
- Cash to Close
Most lenders are credit-driven. They will not only look at your score, but also review your credit history. Your credit history will outline the credit lines you’ve taken out. Revolving lines of credit, credit cards, installment loans, and service. It will also measure if you’ve paid on time. Your credit worthiness is a reflection on your ability to repay.
Link to: “Understanding Your Credit” video by Nikki Holcroft (2018 Housing Fair)
What is your gross monthly income? Is it enough to sustain a mortgage on top of your other debts such as car payments, student loan payments, credit cards and/or lines of credit? Different loans will allow different debt to income ratios.
In most cases, lenders will look for at least two years of verifiable stable income.
There are exceptions for recent grads and other unique situations.
Link to: MCPHO – “Understanding Mortgage Loans” video with Jerome Scarpello and Mike Thompson at 5:15
Cash to Close
Do you have enough cash to close the transaction? Typically, you will need funds for a down payment, closing costs (in addition to your down payment) and 1 to 3 months of mortgage payment reserves. Minimum down payment can range from zero to 5% of purchase price – depending on the loan program. Closing costs are often in the 5% range, but can sometimes be partially paid by grant programs or through a “seller assist”. (Discuss with lender and Realtor)
Link to: MCPHO Mortgage Basics