When purchasing your first home, you should take several steps prior to calling a real estate agent to view new homes for sale in Greenville, SC. Start by creating a budget to decide if you qualify for a home loan. After you learn what lenders look for, you’ll be more prepared for mortgage approval. The following information will help you prepare to apply for a mortgage and receive speedy approval.
Proof of Income
Be prepared to prove your income to qualify for a home loan to buy homes in Greenville, SC. You will need W-2s, tax returns, and pay stubs. In some cases, you might have to provide your bank statements. Generally, lenders request two years of proof of income. If you are self-employed, mortgage companies might require you to provide an audited profit and loss statement from your accountant. In lieu of that, some mortgage companies will accept bank statements in addition to tax documentation.
In addition to proving your income, you must show proof of liquid assets. Some mortgage companies will not allow you to borrow the down payment – you need to have that on hand. You can show assets by providing bank statements and investment account statements.
Some mortgage companies allow you to use money gifted to you, and some also have down payment assistance programs. If you have a hard time saving for a down payment, ask the mortgage company about any programs they might have. Additionally, certain types of loans allow you to put less money down. These usually are government-backed loans, such as Fanny Mae, Freddie Mac, and VA loans.
In most cases, your credit score must average 620 or higher. Mortgage companies usually pull scores from all three credit reporting agencies and average them. While you can get a loan with a score lower than 620, the interest rate and down payment are usually higher. If you want a lower interest rate, your score will need to be at least 760.
One of the other items lenders check is your debt-to-income ratio (DTI ratio). This tells a lender if you have enough income to pay all of your bills. To calculate your DTI ratio, add up all of your fixed payments for the month. These include credit card minimums, rent, car payments, and student loans, among others. Divide this total by the pre-tax household income for the month, then multiply that number by 100 to get the DTI ratio. Most lenders will not lend to you if your DTI ratio is over 40 to 50 percent, including your new mortgage payment. Most will not lend unless your DTI is 33 percent or less without including your home loan payment.
Most lenders require a down payment of 10 percent of the purchase price. However, with some loan programs, you can get a loan that requires a down payment as low as 3.5 percent of the purchase price. However, if your down payment is less than 20 percent, lenders could require you to purchase private mortgage insurance (PMI).
Most lenders require you to be in the same job for two years or in the same profession for three to five years. You will have to obtain employment verification from your employer. If you are self-employed, you can use tax returns to prove your employment stayed the same, but you might have to show that you were self-employed, doing the same type of work for more than two years.
Contact The Parker Group
After you have all of the documents together, contact your lender for a pre-approval letter. Once received approval for a home loan, you are ready to start house hunting with the best real estate agents in Greenville, SC.
For more information about purchasing a home in Upstate, SC, including Greenville, SC, contact The Parker Group.