Are you planning to buy your first home?
Buying a home for the first time can get very demanding. It is not that simple and it definitely needs careful planning. One of the most essential steps to take to be able to purchase your first home is to apply for a mortgage loan, and in order for you to get approved, there are qualifying requirements you have to prepare.
There are important factors to be considered when you apply for a home mortgage loan. These include, but are not limited to, your capacity to pay, your credit scores, and debt-to-income ratios. Here’s what you need to know on how to qualify for a loan, especially if you’re buying your first home.
Credit Score Requirements
Mortgage lenders require your credit scores as one of the most important qualifications for a home loan. What are credit scores? Basically, these are numbers that reflect the history of how you have borrowed and paid back the money.
And why are credit scores an important factor to consider with loan applications? Well, the higher credit scores you have, the bigger the chance that you will be qualified for a home loan as a first-time buyer. What’s more is that it could help you get a lower mortgage rate, which could also help you save more money.
Debt-to-Income Ratio
To ensure that you are not taking too much extra debt with the addition to your home loan, mortgage lenders will review your current debts. Aside from your credit scores, your household debt is also an important qualification requirement for first-time home buyers applying for a mortgage loan. If you have too much debt, there is a possibility that you may have difficulty paying for your home loan.
To review your debts, mortgage lenders look at your debt-to-income ratio (DTI), which is a comparison between your monthly income and your monthly debts. They may check your credit card payments and all other loans.
Important Documents
To qualify for a loan, you must provide basic documents such as your valid government IDs; documents to check your income such as your COE with the breakdown of your salary, your income tax return, and your latest payslips; and supplementary documents such as bank statements for the last three months, credit accounts or loan statements, and your credit report.
Mortgage lenders will review and verify the levels of your income and debt by checking your bank statements, tax records for the last two years, and more. It is, then, vital for you to be able to provide all the required documents for verification. This process is necessary to ensure that you have adequate income to repay your home loan.
Capacity to Pay
If you want to buy your first home, you must be prepared to pay a down payment and pay additional costs. To ensure that you will be able to fulfill your obligations to pay your monthly amortizations, you must have sufficient funds in your bank. If you are financially capable to pay on a monthly basis, then you may be qualified for a loan.
Mortgage Insurance
As a first time home buyer, you would be asked to provide a mortgage redemption insurance (MRI), when applying for a mortgage loan from a bank. What is a mortgage redemption insurance? It is a form of life insurance to cover the amount payable in case of total disability or death. MRI is basically protection for people with home loans, especially for households with just one person earning an income, or a sole breadwinner.
These are just some of the important factors that mortgage lenders require for you to be qualified for a home loan as a first-time home buyer. Bottom line is, if you want to get a loan, you need to have a good credit score, a good level of debt, the capacity to pay, and the necessary documents for verification. Let me help you.