If you're in the market for your first home, you need to make sure you know where you stand financially. When it comes to purchasing a home, your income is only a small piece of the puzzle that lenders will put together to determine your eligibility. If you don't know how you stack up financially, you might be a financial risk and not even know it. Here are four scenarios that could make you a financial risk when it comes to finding a lender.
Your Credit Score Is Too Low
Before you start shopping for a new home, you need to know what your credit score is. That's the number that lenders will look at when determining your credit worthiness. In most cases, if your score is lower than 620, most lenders won't approve you for a home loan. Take the time to look at your credit report to determine what your overall score is. If it's too low, you might want to work on your score before you apply for a loan.
Your Employment History is Questionable
Your employment history can get you into trouble, especially if it's not your typical history. Periods of unemployment or self-employment can create gaps in your employment history. Those gaps will need to be overcome before most lenders will take you out of the high-risk category. One way to overcome gaps is to provide proof of self-employment. You can document periods of self-employment by providing tax returns for those years. Your tax returns will provide an income paper trail that lenders will be able to follow. That paper trail can help elevate you out of the danger zone.
You're Behind on Payments
Before lenders will approve your home loan, they need to know that you're going to pay your mortgage on time. That can be difficult to determine if you're behind on payments when you apply for your loan. If you know that you're behind on payments, take the time to get caught up on your payments before you apply for your loan.
You Haven't Saved for a Down Payment
Lenders like to know that you're going to be adequately invested in the home you're going to purchase. One way they determine your level of investment is through your down payment. If you don't have an adequate down payment, you should talk to your realtor about down-payment assistance programs that might be available to you.
Now that it's time to buy your first home, make sure you understand your own financial status. The information provided here will help you determine if your current situation puts you in danger of being considered a financial risk. Be sure to speak to your real estate agent about ways to overcome problems in your credit status.
For a real estate agent, contact a company such as RE/MAX EXECUTIVES PLUS.
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