So kids, you want to buy a home in St Louis? Homestead Financial is a Mortgage Company in St Louis and Kansas City with answers to the most common questions and the information you will need to qualify for a mortgage loan.
- How do I qualify for a mortgage?
- What does my credit score need to be?
- How do I improve my credit score?
- How much down payment do I need?
Let’s start with the 3 C’s of qualifying for a mortgage: Credit, Capacity, and Collateral.
Credit, Capacity and Collateral
CREDIT: You used to be able to get a decent interest rate and big mortgage with a credit score at or around 580. Now it takes at least a score of 640, if you are below that, you’ll have to work on improving your credit.
580 with X thru 640 underlined or circled
There are many ways to improve your credit score, but paying bills on time and keeping balances low are the best places to start.
Ways to improve your credit score:
Rule no. 1 Pay bills ON TIME
Rule no. 2 Keep credit card (and other monthly debt balances) LOW
CAPACITY: You need to be able repay your mortgage loan and support that ability to repay with documentation. Borrowers must prove sufficient income as well as demonstrate an acceptable debt-to-income-ratio. In other words, your documentable income must be good, but you also cannot be carrying a lot of debt. It’s a good idea to reduce your credit card debt as much as possible before beginning the home buying process.
Most recent pay stubs, W-2 (last 2 years), tax return (for self employed last 2 years)
A debt-to-income ratio below 40% is recommended for example: $2000 monthly obligations/$5,000 gross mo income = DTI of 40%
COLLATERAL: Today most banks want borrowers to put down 20% of the purchase price of the home. However, there are many programs offered by the FHA as well as Mortgage Insurance Companies that insure mortgage lenders against loss while providing options to help consumers buy or finance homes with less than 10% down.
Recommended down payment is 20% of the home purchase price
Reduce required down payment amount with:
FHA programs (such as 1st time home buyer programs)
PMI (private mortgage insurance)
Thanks for viewing our 3C’s quick facts video, I hope you found it helpful. If you have any questions please feel free to call us, our loan officers are friendly and ready to help!
Our loan officers are happy to answer any questions! So give us a call at 800-Homestead-8!