In one of our previous articles we showed that buyers do not have to be worried about acquiring downpayment and/or closing costs should they purchase a home with assistance from Gift Fund Programs. So now that we have the downpayment and closing costs taken care of, our next stop is credit and income requirements.
One of the good things about Gift Fund Programs or Down Payment Assistance Programs, they are usually not credit score driven. So what do the lenders look for when evaluating a buyer?s financial condition to make a loan? Lenders for the most part are looking for accountable and disciplined buyers who will repay their monthly house note.
Remember bankers are people too, and they know and understand that people go through hard times just like some of us do every now and again. What they are most concerned about however, is our attitude as well as the actions we take when we run into hard times. Do we call our creditors and make repayment arrangements or do we run and hide hoping the bill will go away instead of working something out?
If we run and hide from our creditors - the people to whom we owe money, then the banks will believe that if we get into hard times with our house note we will run and hide from them as well. Therefore the purpose of the credit report evaluation is to provide an overview of how we have paid our bills in the recent past.
According to several lenders, loans made in conjunction with the Gift Fund Program such as FHA backed loans require at least twelve (12) months of on time payments to be considered an acceptable credit risk.
The second aspect of financial requirements for buying our home involves evaluating whether or not we have a sustaining income to make the monthly house note.
As buyers we will have to provide the lender with detailed financial information on all sources of income. Lenders cannot discriminate on the source of income. We will also have to provide detailed information on all our debts. The lender will then calculate the ratio between these two and make a determination on the maximum purchase price our income and debts could sustain. Once this is done we may start looking for the home we would like to buy and in the price range that we can afford.
It is a wise practice for all prospective homebuyers to do the following: 1. Get a free copy of their credit report from all three credit bureaus. www.annualcreditreport.com
2. Review the report for accuracies and inaccuracies. 3. Contact a reputable & competent real estate professional or mortgage lender who will be able to guide you through the process of correcting errors if any on your credit report.
3. Those with non traditional credit are often allowed to use alternative credit such as utility accounts, cell phone accounts, insurance accounts, rent payment history etc. In summary, lenders look at your bill paying habits and your income to decide if you are ready to purchase your home.
