The process of buying a house can be both lengthy and stressful. And being unprepared for certain aspects of it only makes things worse, especially when it comes to getting a mortgage loan. You certainly don’t want to go through the disappointment of being rejected after putting in all that time and effort to find the perfect house. With that in mind, we present these 4 tips to help you qualify for a mortgage in Ventura County.
1. Save Up Some Cash
Keep in mind that mortgage lenders are generally cautious. After all, they want to protect their investment by making sure you are a good risk. Typically, this means you need to have at least enough cash on hand to cover the down payment, which can range from 3.5% to 20% of the sale price. Beyond the down payment, there are closing costs (typically 3% to 5% of the mortgage balance), appraisal and inspection costs, application fees, credit report fees, and possibly other expenses. So if you want to qualify for a mortgage in Ventura County, you can’t walk into the mortgage lender’s office with no cash in reserve (most of the time).
2. Pay Down Debt and Don’t Take on New Debt
As we mentioned, a mortgage lender’s first order of business before you can qualify for a mortgage is to ensure that you are a good risk, a safe bet with respect to paying back the loan. And this means that you can’t have a bunch of existing debt or take on new debt during the qualifying process. So before you apply for a mortgage, you should try to pay off or at least pay down the debt you currently have.
Lenders generally use a debt-to-income ratio to determine whether you qualify for a mortgage in Ventura County. If you have a lot of debt as compared to your income, you may not qualify. The rule of thumb is that your debt plus mortgage payments should not be more than 36% of your gross monthly income. If your percentage is higher than that, anything you can do to decrease it will help. And it’s usually easier to pay down consumer debt than it is to make more money.
3. Be Aware of Your Credit Score
Your credit score matters, and it takes only minutes to pull a credit report and check it. Still, many buyers never review the report and check their score before applying for a mortgage, just going in blind and hoping for the best. Most lenders require a credit score of at least 680 (although you can get by with 620 for FHA loans), and if your score is below that, you may not qualify for a mortgage. Some simple steps you can take to improve your score include paying bills on time, paying down debt, and correcting errors in the report (which does happen). Your local real estate professional can guide you in cleaning up your credit history to improve your chances of qualifying. (Just call 805-232-8503 to find out more.)
4. Consider a Different Type of Mortgage
If you’ve done everything you can and find that you still don’t qualify for a standard mortgage, the game isn’t necessarily over. You can still pursue other mortgages options that have less stringent requirements and use different qualifying formulas, such as the residual income method.
For example, the Freddie Mac Home Possible program is designed to help people with lower incomes qualify for financing. To qualify, you simply have to have an annual income that is equal to or less than the median income in your area. If you have a history of paying bills on time, you may qualify for an FHA loan. So you do have qualifying options.
Can you qualify for a mortgage in Ventura County? It depends on a lot of factors, including income, debt, payment history, credit score, and sometimes the whim of the lender. But a local real estate professional can help you sort all this out.