The Application Process on How to Purchase Your First Home by First Time Home Buyer Help dot COM

Information necessary to apply

The initial application consists of the following basic parts:

Personal – Name, date of birth, social security number, addresses for the last two years, phone numbers, years of schooling, and number and age of children.

Employment – Two years history including name, address and phone number of employer(s), positions held, pay structure and beginning and end dates.

Assets – Bank account information for checking, savings, money markets, CD’s, brokerage accounts, IRA’s, and 401K/403B retirement accounts. Account numbers are not necessary upfront for the initial application.

Liabilities – we will obtain your credit report and or software facilitates the transfer of all of your outstanding monthly obligations directly into your application. We will then verify the accuracy with you directly. Most, if not all of this information is stored in your head!

The Ease of Automated Underwriting

If you have relatively good credit, today's automated underwriting systems provide a list of only the documentation that is necessary to satisfy the lender. The way it works is that once the lender has your application and has pulled your credit, the file is uploaded to one of three locations, Fannie Mae, Freddie Mac or possibly directly to one of hundreds of lenders. “Fannie and Freddie” are quasi governmental agencies that set the guidelines that dictate whether a loan is saleable. In other words, if it is approved by “Fannie or Freddie” virtually any lender in the country will do the loan. If it is not, hundreds of national lenders have their own proprietary systems. So plan “B” would be to go through independent channels to see if an approval is possible that way. Once an approval is obtained (it takes less than 5 minutes once we have all the information), the approval will tell us exactly what documentation is necessary to satisfy the lender. Be wary of lenders that ask for everything up front prior to having a binding approval through an automated source. They are most likely requiring you to provide a lot of personal information that may not be required.
On the flip side are the borrowers with less than stellar credit or not enough for the down payment. Although the process is typically longer and more cumbersome, it is more predictable than it was in the past. Surprisingly, programs are available that open the door to homeownership to an amazing number of people. You'd be surprised at who will qualify for a mortgage today!!

What Type of down-payment will be required?

If you believe that you need a good chunk of change to purchase a home, your not alone. The vast majority of first time home buyers have little money to work with and consequently do not believe they are in a position to buy a home. Either that, or credit issues prevent you from investigating the possibilities. But times have changed.

A standard conventional loan will always require that the buyer contribute a minimum 5% down payment of the actual purchase price of the home to qualify for the very best interest rate. If you have less that that to work with there are many different options. Programs have proliferated offering either 3% or no down payment options. But like everything in life, if it seems to good to be true, there is usually a catch:

Your interest rate will be slightly higher than it would be with a minimum 5% down payment due to the high-risk nature, but are typically determined based on the borrower's credit scores. If your credit is good, the rate will not be that much higher. If your credit is not so hot, a loan may still be available but in general, credit scores must be 600 or above and you must have a good payment history over at least the last year. Also you must have at least three tradelines (creditor's) in existence to qualify.

You will pay a mortgage insurance premium. Simply put, mortgage insurance protects the mortgage company against financial loss if a homeowner stops making mortgage payments. Mortgage companies usually require insurance on low down payment loans for protection in the event that the homeowner fails to make his or her payments. When a homeowner fails to make the mortgage payments, a default occurs and the home goes into foreclosure. Both the homeowner and the mortgage insurer lose in a foreclosure. The homeowner loses the house and all of the money put into it. The mortgage insurer will then have to pay the mortgage company's claim on the defaulted loan. The loan can be structured as two separate loans consisting of a 1st Mortgage for 80% of the sales price and a 2nd mortgage for the remaining 20% to avoid paying mortgage insurance but the guidelines are stricter for qualifying. New for 2007, PMI is now tax deductible click here to learn more.

There are special first time homebuyer programs that allow for low down payment loans with reduced or no mortgage insurance. The challenge is that there oftentimes are income limitations (income cannot exceed 80% of the HUD median income level or $69,000 in metro Atlanta). That generally means that homes above $250,000 are off limits.

But all that said, it is a wonderful opportunity to get into a home and take advantages of all the benefits of homeownership, the interest deduction, appreciation and pride of saying it is yours! Just remember that you will most likely have to stay put a few years in order to realize the appreciation that will allow you to move up to larger digs.