Tips to get you on the fast track…
Frank Merola is Executive Mortgage Banker for William Raveis Mortgage LLC.
if you’re a millennial looking to buy a house here are some tips to get you on the fast track.
- Build up your credit. There are a few things millennials want to be aware of such as their FICO score(s), payment history and tradelines. When it comes to credit scores typically higher equals better. A borrower with a 800 average FICO score will have more loan options available to them than someone with a 600. Millennials will also want to have 2-3 tradelines such as student loans, car loans or revolving debt (such as credit cards) that have been paid on time for the past 12 months.
- Try to manage your student loan debt. When lenders look at debt to income ratio’s they factor in student loan payments. Even if student loans are deferred with no payment showing on the credit report, some loan options like FHA will use 1% of the outstanding balance to calculate a borrowers debt to income. If it’s possible to pay off your student loans or refinance them to a lower monthly payment, this might help with qualification.
- Job history is important. Most lenders need to see a two-year job history. The good news is that gross earnings before taxes can be used to qualify. The bad news is that normally overtime, commissions and bonus income is not allowed to be counted unless there is a full two-year history. In certain situations where you are paid a salary, you might be able to qualify with a six-month work history if you have a college degree and are working in a field related to what you studied in college.
- Save for a Downpayment or try to get a gift. Many First Time Buyer programs these days are low Downpayment. For example USDA loans are 100% financing, Mass Housing has loans with 3% down and FHA is 3.5% down. If the Downpayment is an issue, borrower can try to obtain gifts from family members. Often times these can be used to cover 100% of the Downpayment and or closing costs.
- Get a Pre-Approval. It’s worth it to sit down with a mortgage lender to determine your ability to qualify for a home loan. Each lender has its own eligibility requirements and underwriting criteria. Since most mortgages are 30-year loans, it’s also important that you feel comfortable with the monthly payment that you will be responsible for each month. Having a pre-approval letter will let the seller of your dream home know that you are serious.
Finally set realistic expectations. It’s easy to feel lost in a crowded field of well qualified buyers. If you set realistic expectations for buying a starter home, you might find a “diamond in the rough” that other buyers with more home buying experience have overlooked.
Thanks for reading and feel free to reach out to me if you have any questions.