Get Approved for a House Loan
There are several home financing for low income options people will want to explore. If you are in the market for a new house, and you don’t make that much money each year, it’s still completely and totally possible to get a mortgage and borrow the money you need to become a homeowner and break the renting cycle. Why not own? With a poor housing market, which we are in, you can actually buy for less than you’ll pay for rent. Even if you are relatively poor, you still have home financing options to keep in mind.
There are several legitimate programs that will help even very low income applicants get approved for a home financing loan. I would like to share some basic information with you about where you should look for help, and what you need to do to qualify.
Common Programs: Fannie Mae, USDA and FHA loans are all good places to look for low to moderate income applicants. USDA or United States Department of Agriculture loans are not that hard to qualify for, as they have liberal income restrictions and liberal credit score requirements. The Federal Housing Administration is another good source for low income families to get home financing loans, even if they have slightly below average credit scores. Look for offices online and in your local area.
Places to Look for Assistance: If you need some help, you can generally find it pretty quickly. Be sure to check with local banks and mortgage lenders, as they will often be able to steer you in the right direction to apply for federal home mortgage programs. Be sure to ask them for help with grants as well, since they often have access to the various house grants that applicants can try to get. In addition, a simple trip to your local government courthouse can help you find some form of help. Don’t be afraid to ask for assistance when you need it.
Use Caution: Whenever you are looking for mortgage assistance for low income buyers, you will run into many scam attempts. Just use caution and don’t pay for anything that should be available free of charge. Online scams are quite common with this.
If you are a low income applicant, you will not necessarily be disqualified from getting a home loan. Many people that make only a little above the poverty level are able to qualify for a great interest rate and get approved. Listed below are some of the ways you can ensure you qualify for a great rate on a traditional home financing loan.
Keep Credit Scores High: If you have a solid credit history, you will often have no trouble when you try to prequalify for a house loan. Those with scores above 720 have very good credit and can generally expect very good rates. By contrast, many government programs, like FHA loans, require scores in the 640 to 650 range. Banks typically want to see a more solid history, so be sure to keep your bills current and minimize revolving debt for the best rates and to get approval.
Have a Sizable Down Payment: While the days of needing 20% down to qualify for home mortgage are pretty much a thing of the past, some lenders are still requiring a very hefty down payment. This is okay, as it will generally give you instant equity in the property, something lenders really like to see.
Minimize Monthly Debt: The amount you owe on your cars, credit cards, and other loans is all taken into account. Try to eliminate some of those payments before you apply and you’ll have a better chance of getting approved for a decent rate. This is one of the most important things you can do as most banks look at something called debt to income ratio. Essentially, they look at how much money you have coming in each month and how much goes out for routine monthly expenses and payments. Keeping your ratio favorable will help you out greatly.
Keep Options Open: You don’t need to apply everywhere, but you should do some basic research to find out what lenders are offering the better rates. Don’t assume national banks are always going to give you the best opportunity. Small, local lenders just might surprise you, especially if you have a long standing history with them for other types of financing.
Take a Second Job: Even if it’s just temporary, it might make the difference in getting approved. Some lenders will only look at your tax returns for total income, but many underwriters will look at your current income level as well. If you took a second job and made just $10 while working one day per week, you’d add right around $300 to your take home pay. This can make a big difference for low income applicants, and even those of moderate income levels. Take a look and see how big of a difference it can make for you. Most likely, the extra money you make can help you get out of the rental cycle, in which you never build value for yourself.
High Risk Lenders
Be very careful if you use higher risk lenders, as they charge a much higher interest rate. Take a look at a basic mortgage calculator and see what an extra 2% interest will make on your monthly payments. The numbers just might shock you. You’ll pay thousands of dollars more over the life, whether you take out an ARM (adjustable rate mortgage), fixed rate 15, 20, or even 30 year loan for a house. The terms and rates you pay make a huge difference. For most borrowers, and adjustable rate can sound enticing, especially given the current prime rate, but as the economy takes off, you could end up paying a lot more down the road. Just use caution and common sense and don’t get caught up in the moment.
Home financing for low income applicants is very possible these days.