(CNBNewsnet)(July 17, 2018)--Some people enjoy renting their home; they like the freedom it gives them to live where they want, and they like the fact that the landlord has a lot of responsibility for upkeep in many cases. However, there are others who would prefer to own their own home, even if that is a difficult thing to do. It’s not impossible, however, to obtain a mortgage, and more lenders are now opening up the opportunity to buyers once more. There must, of course, be certain criteria in place before you are able to get a mortgage; here are some of the most important.
When you apply for a mortgage, the first thing that will need to be considered is your income. You will have to show evidence of what you earn, so if you don’t have any pay stubs, you will need to ask your employer to provide them. They may need to create pay stubs to give you if they don’t automatically give them out when you are paid, but this is not a difficult thing to do.
If you are self-employed and therefore don’t have any pay stubs, then a recent tax return will often be sufficient, but it will depend on the lender you are speaking to; each one will have their own set of criteria, so you will need to find out how they deal with those who are self-employed.
Even if you can prove that you have enough money to pay a mortgage each month, you also need to have a good – or at least fair – credit score. A good credit history will show that you are a responsible borrower, and this will make it easier for a lender to agree to supply you with a mortgage. They need to know that you are going to pay back the money as and when it is required.
You can check your own credit score online before you apply for a mortgage and that way you will already know if it is considered to be low. Some lenders will take your current situation into account (it can take years for a credit file to be updated because defaults and late payments need to stay in file for six years) if you have proof that everything is in hand, but it is good to know to start with so that you don’t get caught by surprise.
Your Down Payment
What can often stop many people from obtaining a mortgage is the down payment required. This is a large up-front expense that could be around 10 percent of the property price. Sometimes it will be more, especially if you have poor credit. This way the lender has more security because there will be more equity in the property right from the start, plus they will need to lend you less.
The more you can pay on your down payment, the less your mortgage will need to be, so it is in your interests to pay as much as possible. Another benefit of paying more is that if you pay 20 percent or higher, you won’t have to take out any additional private mortgage insurance.