What You Need to Know Before Applying for a Home Loan

We’ve all heard it in the news lately - mortgage companies filing for bankruptcy, subprime lending becoming extinct. With the everchanging going ons in the lending world, here are a couple of things to know before applying for a home loan.

Credit Score:Having a good credit score is key in getting approved for a home loan. A credit score of around 680 will satisfy most lenders, but a score of 720 will qualify most people for a prime mortgage at the lowest rates. The average credit score in Texas is 665 according to experian.com.

Down Payment:The days of zero down are few and far between. If you have a strong credit score you may be able to get by with putting down a minimum of 10%. The bigger the down payment you are able to put down, the more likely you are to obtain a loan with lower rates. If your credit score is sub-par be prepared to put down 20 - 25%.

Verifiable Income:If you are self employed, be prepared to have a strong credit score or sizable down payment. Home loans are still attainable but may be harder to come by.

 Other Compensating Factors: Two other important factors in being approved for a loan are your savings and debt to income ratio. The more money you have in the bank, the better. As for your debt to income ratio, your mortgage payment should be less than 28% of your gross income.

 If you’re thinking about buying a house, don’t let the hype deter you from achieving your dream. There are still plenty of lenders out there who are willing to work with you to help that dream come true. Just do your homework before you go out there!