If you’re thinking about buying a home, your first step before actually looking at homes should be to understand the mortgage lending process.
To help me broach this topic, I’m joined for the very first time today by my preferred lender, Trever Kerr of Gateway Mortgage. Trever has been in the business for 15 years, and I’ve been working with him for over 10 years. He’s the only lender I refer to my clients, and Gateway Mortgage makes many exceptions for their clients that other lenders can’t.
The first part of the mortgage lending process is to find out whether you qualify for a loan. If you don’t qualify, your lender can tell you what you need to do to get qualified down the road. In addition to knowing what you qualify for, you also have to work with your lender to know what your comfort level is as far as what your monthly payments will be. Even though you might qualify for a $300,000 home, you might only want payments on a $200,000 home.
If you don’t speak to a lender, you won’t know what your roadmap to homeownership is. Some people think they can qualify when they can’t, while others think they can’t qualify when they actually can. These people do the wrong things for their credit thinking they’re doing the right things, like paying off their collections once they think they’ll purchase a house soon. Trever and I both see this happen all the time.
Paying credit repair companies to help you fix your credit score isn’t necessarily the best idea, either. Many of these companies end up doing things that hurt their customers. To be clear, I’m not bashing the credit repair industry as a whole. There’s a place for it for some people, but overall, a lot of it is unnecessary, especially when you can call an expert like Trever and get his advice for free.
Your loan qualification guidelines in our current market can depend on the type of loan product you intend to get, but you can generally qualify with a credit score as low as 600. If you don’t have the cash for the down payment and closing costs, there are different gift programs available for first-time homebuyers.
Lastly, your debt-to-income ratio must also be in line. As a general rule of thumb, a debt-to-income ratio for the purchase of a home should be 35% of your total gross income before taxes. The second part of that ratio is the 45% of your total gross income you’re allowed to use to cover your house payment, taxes, insurance, and other bills.
I want to thank Trever for helping me today. Stay tuned for more videos featuring both Trever and I where we’ll talk more in depth about credit scores, debt-to-income ratios, and other facets of the lending process. If you have any questions for him, you can call him at (972) 822-7408 or email him at Trever.Kerr@gatewayloan.com.
If you have any questions for me, please feel free to give me a call or shoot me an email. I’d be happy to help you.