One of the most frequent questions I’m asked during the pre-approval process is: “What’s the maximum home price I can afford?”
The answer to this question is found in the 3 pillars of qualification:
- Credit
- Income
- Assets
Credit
A good credit score is a must nowadays. The minimum credit score to qualify for any of our programs is 620. But for the very best rates and terms, you really need to be above 700. This means you need to have your credit in order prior to applying. A bankruptcy will cost you a minimum of two years before application can be made, and a foreclosure or short sale will cost you three years before you can apply. Make sure you have an idea of your credit score before you inquire. If you have impaired credit, you’ll want to make sure that you disclose this prior to applying so that we can refer you to our credit repair specialist, Gwen’s Helping Hands , who can help you and would be happy to discuss your situation with you.
Income
Income, the second pillar of qualification, is another critical part of the pre-approval process. A good rule to follow is to have a two-year employment history. We will qualify you using your base income. If we need to add overtime, you must have a two-year overtime history to qualify. This is also the case for part-time income. Most of our programs will allow for a mortgage payment up to 45% of your verified gross monthly income, including any monthly expenses which show on your credit report.
Assets
Assets is the last of our three pillars for qualification. The rule here is to have your money saved prior to application. We will verify down payment and closing cost requirements at your pre-approval and advise accordingly if you need to adjust your amounts. Gifts can also be accepted, but the most important thing to remember is to save for 3% of the purchase amount, plus an additional 2% for all other costs. We have loan programs with as little as 3% down payment. If you’re a veteran, you may also be eligible for a 0% down payment program. 401K and deferred compensation plans are eligible sources of down payment, so please be sure to include these statements at the time of your application.
To get started on your complimentary pre-approval, please contact us.
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