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Looking for a new home can be stressful for a first time buyer especially without the proper tools to know what to look out for in the home loan search. This site is operated by mortgage loan originators who deal personally with those seeking first time buyer loan programs to help them in their quest for the American dream. There are many common pitfalls and errors that potential home buyers find and often overlook. Of course we recommend submitting a mortgage loan request with us so that well qualified mortgage originated can reach you and explain the ins and outs of the process. If you decide to contact us via this location great, if not, we hope that the buying information below helps in your quest for a home loan that meets all your buying needs.Understanding Common first time buyer home loan programs The most common loan for a first time buyer seems to either be the fha loan or a veterans home loan. Both programs are insured by the federal government and they operate under federal required guidelines. What does this mean for you. Well, the government wants those who desire a home to receive one. It helps to promote community and ensure prosperity. So, they attempt to make the guidelines to qualify more lenient and reasonable for the "real world". The Fha falls more into this category. The money lent to first time buyers by fha is often done by the lending institution and not the government. So think about what the lender wants to see in a first time buyer when they are reviewing the loan situation.
1. The credit of the buyer establishes the ability to repay debts. Most first time buyers have some credit history. If the history shows several open and active trade lines and no late's, delinquency, judgments, collection or liens the obvious is true. The potential home buyer will have a positive credit rating and a high credit score (note* many first time buyers do not know their credit score, they may have reviewed the credit report but with no score determined, usually lending institution receive the score on the reports.) But many first time buyers may not have a positive credit history or even no history at all. The FHA loan allows for this situation. The credit guidelines allow for debts collections to be paid off prior to the loan being closed. They also allow for alternative credit history to be used in order to establish a buyers ability to repay debt. For example. Cell phone, pager, car insurance, rental history any monthly installment debt that can be proven. At minimum the underwriter will require proof of positive payment history for these alt credit history tools. 2. First important part of the income is called the monthly debt to income ratio. It is general rule used to determine how much a first time buyer can use of their monthly income for paying monthly installment or revolving debt. To compute this take the yearly average income and divide it by twelve. Times that amount by 42 percent and subtract from that all minimum monthly required debts payments of the buyer. Example : The first time buyer's salary of 35,000 a year, monthly debts on credit report : minimum credit card monthly payments = $ 110 and a car payment of $190. So take the 35,000 and divide that by 12 = 2916 then times that by 42% = $1225 subtract the buyers monthly minimum debt 2915- 110 - 190 = 925. Now you have to subtract from this number potential property tax and insurance 925 -120 -50-50 = 705 So, the income of the first time buyers allows for a 705 monthly principle and interest mortgage loan payment if the buyer has a yearly salary of 35,000 and a current monthly minimum debt payments of 300. Using 705 is good starting point because depending on credit and other factors the ratio of 42% can vary and go up to 50%. Use the qualifying for first time buyer chart to determine the loan amount/new home sales price to find what to look for. If rates on the 30 year fixed rate mortgage are 6.125% and 705 is the allowable PI payment then divide 705 by 6.06 = 116,000 so a first time buyer in this scenario can qualify and should look for a sales price of $116,000. Many times a first time home buyer has recently graduated from school or has changed jobs. This education issue can be solved by proving that prior to the current employment the buyer was in school with a registration or diploma. As far as changing of jobs it would be a good idea to contact the human resources/manager to get a letter which guarantee the income level and the continuation of employment. The only time this really becomes a problem is when the employment is commission based. Most government first time buyer programs require at least two years of average income with commission employment. 3. Collateral for a new home first time buyer should be at least 2 months of reserves for the probable mortgage payment. So if the potential payment is 1020 then there should be at least 2040 in savings and more would be better of course. Also considered collateral for a first time buyer is the home itself. This home must meet strict guidelines for either fha or veteran home loans (often referred to as va home loans) There are strict structural and safety guidelines that the property must meet in order to considered a proper collateral for the first time buyer. Often the home listing will state that conventional offers only. This may be because the seller knows the home will not meet the guidelines and the seller does not want to pay the required fees that have to be paid by the seller on a government home loan sales transaction. There are many other local savings for first time buyers granted by state and localities. The most common of these is a reduction in the taxes on the transfer of title form seller to buyer. In order to determine what savings programs are available in the first time buyers are you must speak to well qualified loan officer in that respective locality. Many loan originators work on this site and will be able to help large amounts of buyers on first time savings programs. Privacy Policy | Maryland Mortgage | Refinance Mortgage Company This is not an advertisement for credit as defined by paragraph 226.24 of regulation Z. This is a website and IS NOT A MORTGAGE COMPANY OR BROKER. This site does not offer rates or mortgage loans. |
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