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Hi, my name's Chad Petty. There are a few things a first time home buyer should know
about first time home buyer qualifications. The first thing is down payment. When purchasing
a home, it is best to have saved money for a down payment. Lenders want to know how much
of a down payment you're going to be making in relation to the overall cost of the home.
This is known as loan to value, or LTV ratio. Lenders calculate your loan to value ratio
by dividing the amount you are asking to borrow by the value of the home you want to buy.
Ideally you want to have a LTV ratio of 80 percent or less. If you have a LTV higher
than 80 percent, you will most likely have to pay for private mortgage insurance or PMI.
It is therefore a good idea to save for a 20 percent down payment. If 20 percent is
out of the question, it's a good idea to put 15 or 10 percent down. That way you'll have
some equity in your home. Also keep in mind that mortgage lenders will want verifiable
proof that these funds exist, so have your bank statement ready. The second thing is
limited debts. Mortgage lenders look at your debt to income ratio or DTI to determine how
much this amount is and how much you can afford to borrow. The ratio is calculated by dividing
your pre-tax income by the amount used to pay off debts on a monthly basis. Your credit
card payments are included in this calculation as the minimum payment required, not the amount
you owe each month. Your total potential mortgage payment should include taxes and property
insurance. Third is your credit history. Your credit score plays a major role in borrowing
and mortgage rate eligibility. Most loans require a minimum score of 640. If yours is
below, don't panic. You have options. There are some lenders that will take into consideration
lower scores and there are ways to rebuild your credit. The fourth is your employment
record. Your job history is also important in whether you can qualify for a loan. Lenders
will look more favorably at someone who has kept the same job for two or more years than
someone who has changed positions frequently. However some job moves are looked upon more
favorably than others, particularly those resulting in equal or more pay. If you're
self-employed or work on a commission, lenders will likely require more financial information
from you, such as personal and business tax returns. If you've found this information
helpful, there is more for you on my website. Just visit ChadPetty.com or give me a call
at 505-349-5289. Thank you and have a great day!