When buying your first home, there are key things that lenders are going to evaluate to help determine if they would finance your mortgage. Each lender and each insurer have specific criteria and regulated guidelines they must follow when lending you money for a mortgage. Here are key things that are looked at!
Credit & Credit History:
Lenders want to ensure that you’re capable of borrowing money and repaying it. To qualify for your first home lenders typically look for the following:
1. 2 active trades (2 Sources of credit, ie. Credit Card, line of Credit, Student Loan, Car Payment)
2. 2-year history (having both trades/sources of credit for at least 2 years)
3. Credit limits of $2000 or more for each trade.
Down Payment & Closing Costs:
When buying your first home, you must have the down payment and closing costs. The minimum down payment requirement is 5% of the purchase price. Closing costs are an additional cost to the down payment, approximately 1.5% of the purchase price. Many lenders accept fully gifted down payments or partial gifted down payments from family members. When putting less than 20% down you are required to have default insurance.
Qualifying Rate & Stress Test:
When qualify for your mortgage you’re required to qualify at a higher interest rate than what your lender would be giving you. This is known as the ‘Stress Test”. When putting 5-19.99% down you must qualify at 5.34% (subject to change). When you’re putting 20% down, you must qualify at the great of 5.34% or the contract rate +2%.
If you have any questions or concerns about buying your first home, please contact me and I’m happy to help. If you’re looking to dive right in, Start you no obligation application today!