Do I Qualify For A Home Loan?
If you’re thinking about buying a home you’re probably also wondering if you qualify for a home loan.
The short answer is “probably yes”.
The longer and more complicated answer is that not all home loans are the same and you may only qualify for a low loan amount and may not get the best interest rate and terms.
Not All Home Loans
Are Created Equal
It’s important that you know that there are lenders who specialize in offering loans to buyers with far less than perfect credit. Specialized lenders have “sub-prime” loan products that have relaxed qualifying criteria but are more expensive than loans offered to borrowers with excellent credit.
One of the best things about the housing industry is that credit, in the form of a home loan, is readily available, even to under qualified buyers.
That’s because your lender is comfortable lending against the value of the underlying asset that you provide as security – namely the property itself.
If you default on your loan, the lender is a secured creditor who has the right to foreclose on your loan and acquire title to your home. Once the lender has title, the lender can sell the home to recover the money it lent to you when you bought the home.
Even if you have a bad credit score, say in the 500 point range, you may still qualify for a home loan, as long as the lender is comfortable with the value of the underlying asset (your home) used to secure the loan.
It may sound crazy, but it’s often easier to qualify for a home loan than a bank overdraft, as the lender likes the security provided by the mortgage registered against your home.
It will also help if you can show the lender that you can afford the loan and that you’re in a position to repay the loan. This is where the lender will look at your personal, financial and credit position.
Think about it like this:
You find a home that you want to buy for $250,000. You’re concerned that you won’t qualify for a home loan because your credit score has a few dings and sits around a score of 580.
Here are the things that will help you get a loan.
- The home will be your primary residence
- You have a stable job and your monthly mortgage payments will be less than 28% of your monthly loan repayments
- You have a nice down payment saved or available as a gift from your parents
- You are buying the home in a good area at less than its appraised value
- You qualify for a number of housing assistance programs, like being a first time buyer or as veteran
All of the above are things that will positively influence your home loan application.
The most important thing that you can do right now is speak with a mortgage broker about your current financial position, what you need to do to qualify for a home loan and what home loan products are available.
You also need to discuss what you need to do to improve your credit profile and qualify for a better home loan.
There’s a great deal of paperwork and hoops to jump through, but just about anyone can qualify for a home loan.