Qualifying for a home loan can be a relatively easy process and should be the starting point for a home buyer. To qualify, a mortgage lender will look at a variety of information in determining if a borrower is credit worthy. The two key factors are your ability to repay a home loan and your past experience in paying off other debts.

Your ability to repay a home loan is measured by your annual income. If you are an employee this is usually reported on your form W-2 from your employer. Length of employment generally should be at least two years with the same employer or at least in the same field of employment for several years. Then your proposed monthly mortgage payments plus any other loan payments you have are divided by your current monthly income to determine your financial ability to repay. This calculation is called your debt to income ratio and is used by all mortgage lenders in determining if you can qualify for the amount of the loan you are seeking. In some cases other loan payments not related to your home loan can be excluded in the analysis of qualification with certain career programs.

Your past credit history will measure your willingness to repay the loan. A mortgage lender will obtain your credit report which will indicate how you have paid previous loans. Timely payment of past loans will help increase your credit score and late payments will lower your credit score.

Home loan qualification varies with each individual and can be tailored to the specific financial circumstances of a borrower. Many applicants that are weak in one financial area can compensate in another area. Some compensating factors could be down payment, long term employment, and professional licenses . NextHome offers career-specific options for Doctors, Nurses, Police & Fire, Teachers, Military & Veterans, Pharmacists & Dentists.

The turmoil in the mortgage loan industry has resulted in many changes including tightening credit standards for borrowers, revision of home loan underwriting standards and the elimination of many home loan tandem products. The mortgage markets are adjusting and consumer choices are also changing.

One example is 100% financing on home loans. In the past, many home loan programs achieved 100% financing by taking two mortgage loans on a home. The first loan would be for 75% to 80% of the purchase price and the second loan, also referred to as a “piggyback” loan was for the remaining 20% to 25% to achieve 100% financing. These types of home loan mortgage programs are no longer available. However, there are still mortgage loan programs to effectively finance the total purchase price of a home. 

FHA Loans are available through the Federal Housing Administration. With the Down Payment Assistance program, the seller of a home can contribute up to 3% of the purchase price and the remaining 97% if financed through the FHA at a competitive interest rate. 

My Community Mortgage is another possibility. The seller again can contribute 3% thru the use of a Down Payment Assistance program of the purchase price and a My Community Mortgage makes up the 97% balance. The loan interest rates for the My Community Mortgages are also very competitive with other mortgage loan products. 

NextHome Mortgage offers both FHA Loans and My Community Mortgages which can be designed with down payment assistance provided by the seller to effectively finance the home purchase.  Visit our home loan page to get more details.

The mortgage industry and banks in particular are reeling as a result of their inability to sell home loans they originated to investors. The concern centers on current economic conditions and declining property values in many markets. Consequently, the Federal National Mortgage Association (FNMA) has instituted specific guidelines to reduce credit and collateral risk to lenders.  

The term “Declining Market” is determined by appraisers and utilizes various data sources including national and local information. If a home is determined to be in a declining market, the maximum home loan amount that can be borrowed is reduced by 5% of the revised appraised value of the home. This simply means that a buyer must increase their mortgage down payment by 5%. The declining market rules are rather subjective, which means that declining markets can be defined within a city or suburb, or even a neighborhood.  

Both home sellers and home buyers should be aware of the ramifications of the declining market adjustment before an offer is made and accepted. An experienced mortgage lender familiar with the declining market underwriting process is essential for a home buyer before an offer is made. 

If your ability to purchase a home with a conventional loan is adversely affected by these changing conditions, NextHome Mortgage has a variety of home loans that can reduce the amount of money required as a down payment. Start your search by visiting our Mortgage Home Loan page.