| Nothing spells stability like a house does. This is | | | | but the operative word here is difficult, not |
| why it is the ultimate goal of every wage-earning, | | | | impossible. |
| tax-paying American to own his own house. All | | | | If you have poor credit history, what you do is |
| too often, the easiest way to own a house is | | | | keep your record clean for at least two years. |
| through mortgage. How does mortgage work? | | | | Pay off those credit cards and car loans. Such |
| You secure money from home loan lenders to | | | | payments will reflect favorably on your credit |
| buy a house. | | | | history and would make you less of an |
| There are two things that lie close to home loan | | | | investment risk to home loan lenders. |
| lenders' hearts. The first is profit. The second is | | | | The Significance of Debt-to-income Ratio |
| your ability to pay. Every now and then, there are | | | | Home loan lenders consider not only your credit |
| home loan lenders who truly care about the | | | | history but also your debt-to-income ratio. Your |
| well-being of their clients, but this type of home | | | | debt-to-income ratio is the money you make |
| loan lenders is few and far in between. In dealing | | | | each month pitted against the debts you pay off |
| with home loan lenders, you must keep in mind | | | | monthly. |
| that they are running a business and the bedrock | | | | As a rule of thumb, the mortgage you can get |
| of every healthy business is return on investment. | | | | will be somewhere between 2.5 to 2.75 times |
| Therefore, home loan lenders put high premium | | | | your income. If you make $90,000 a year, for |
| on taking care of business and what better way | | | | example, you might be pre-qualified for a |
| to do this than by ensuring that everyone who | | | | mortgage of $225,000 to $247,500. |
| takes out a mortgage is able to meet payments | | | | In determining your debt-to-income ratio, home |
| on time? | | | | loan lenders consider your car payments, student |
| The Importance of Credit History | | | | loans, and credit card balances. If your monthly |
| Home loan lenders look at your credit history to | | | | income barely meets your monthly expenses, |
| gauge your ability to pay. Your credit score | | | | your home loan lender will naturally require you to |
| speaks volumes about the kind of debtor you are. | | | | pay a higher interest rate. The logic for this is |
| A credit score is a standardized measure used by | | | | simple. Even without payments on your house, |
| home loan lenders to assess potential borrowers' | | | | you are already having difficulties making ends |
| ability to discharge debts. 900 is considered an | | | | meet. Thus, you represent high-risk investment to |
| ideal score while scores of 620 and above will | | | | home loan lenders. To justify their funding of a |
| qualify you for a conventional mortgage. Should | | | | high-risk investment, they will have to charge you |
| your credit score fall below 620, you will have to | | | | more. This is the only way your mortgage will |
| utilize more creative means for financing and bear | | | | appeal to them, despite all associated risks. |
| with higher interest rates. | | | | In taking out a mortgage from home loan lenders, |
| Dealing with Poor Credit History | | | | you will need both patience and cunning. More |
| Credit problems, however, do not disqualify you | | | | importantly, you will need to make decisions. Just |
| from getting a mortgage from home loan lenders. | | | | be sure to gather all the information you need. |
| It will be more difficult for you to take out a loan, | | | | You cannot go wrong with informed decisions. |