Home Start, Inc., A Member of The Affordable Homes Group, Inc.


General Qualifications for Purchasing a Home You must qualify for a mortgage in order to become a homeowner. No down payment, closing cost, or subsidy program available will be of any use if you do not meet the other requirements to obtain the mortgage you need to purchase a home. Credit is not the only factor that determines whether or not a borrower is qualified, but is most commonly the factor that disqualifies a potential borrower. At Home Start, Inc., we can help buyers who are not yet qualified for a mortgage to obtain one through reputable lenders who are offering good loan programs for first time homebuyers. We cannot fix your bad credit for you. I have never seen my credit report. How can I obtain a copy? In 2004 the Federal Trade Commission made it possible for residents across the U.S. to obtain one free copy of their credit repot from each of the three major credit reporting bureaus once every 12-month period, and may do so through a single, centralized source. Previously, New Jersey residents could obtain free reports once per year, but had to contact each of the three bureaus separately. To obtain copies of your credit reports from Equifax, Experian and TransUnion, visit annualcreditreport.com, call (877) 322-8228, or complete the Annual Credit Report Request Form and mail it to: Annual Credit Report Request Service, P.O. Box 105281, Atlanta, GA 30348-5281. While the reports are free, your credit score is not included unless you opt to pay a fee to obtain it. While it is important to see your credit profile, it is not always necessary to see your score, especially if you know you will be in the early stages of working on repairing your credit. What your score is today is irrelevant to where it will be once you have reached your credit goals. How NOT to obtain a copy of your credit report: Signing up for a credit monitoring service of some kind just to receive a free copy of your credit report is not recommended. Steer clear of those that offer a "Free 30-Day Trial," particularly if you are the type of person who frequently forgets to cancel during your free membership period - and finds a rather large fee charged on your next credit card statement. Should you already subscribe to such service, and find it to be useful in your situation, then you will benefit from the free credit reports that are often included. If you do not use this type of service, you might choose to go the route of paying outright for a copy of your credit report first. This is likely to be the less expensive alternative to signing up for an annual monitoring service. We recommend that all clients first through the Annual Credit Request Service to obtain their own reports for free, but if you have need to obtain additional reports during the twelve-month time frame, Home Start has an account with a credit reporting service and has the availability to obtain a tri-bureau, merged report with a $20 individual/$30 joint fee and your signed authorization. For us to do so, you must complete the Homebuyer Information form, sign for authorization, include the fee, and mail the documents to us. This report, unlike the free copy you obtain once a year, appears as an inquiry on your credit profile, so we never recommend it as the first option. I think my credit is good. Now how do I know if I qualify for a mortgage? There are four things lenders will consider before approving a mortgage application. These are known as the Four C's: credit history, capacity, capital, and collateral. Credit History Generally speaking, you must have three current trade lines with at least a two year history. You cannot have any delinquent accounts or late payments within the past 6-12 months, and no charge-offs, collections, judgments or liens. Lenders will evaluate you in terms of risk. Your credit history tells the bank or mortgage company what amount of risk they are taking on by granting you a loan. Capacity This refers to your ability to repay the loan, based on your income and resources. Lenders do not like to make loans so large that you are spending more than a reasonable portion of your monthly income to make the payments - usually no more than 30-35% or your earnings. In addition, your other debts must be reasonable so that your credit is not overextended as a whole. In evaluating your capacity, lenders look at your occupation, your earnings, and the length of your employment. Two years or more of employment at the same job, or in the same line of work at different jobs, is usually required. Any part-time income you wish to include must also have a history of 2+ years to apply toward your earnings. If you have a stable income with a good employment history, and the lender determines that you can reasonably make your mortgage payments each month, then you will have the capacity to repay the loan. Capital Capital refers to your money in the bank. You must be able to pay down payment, closing costs, and any other associated fees (such as homeowners insurance) in order to receive a loan. You will be required to show two months or more of bank statements and document any large deposits or withdrawals that the lender cannot otherwise account for. Any gift funds that are received must also be documented and accounted for. You should speak openly with your lender up front if you plan to receive a gift and require those funds to purchase your home. Some loan programs limit the amount of the gift you receive and restrict who can actually give you the money. Collateral The property you purchase is posted as collateral against the loan that you borrow from the lender. As such, it must be a "fair trade," or adequately support the value of the loan. You cannot borrow $100,000 from a lender if the home is only valued at $90,000. In order to verify the value of the property, the lender orders an appraisal, an individual assessment of the property's market value. What if I have problems with my credit? The most important thing that many individuals with credit problems may or may not be aware of is that you have the power to negotiate and repair your own credit. You can contact your lenders and creditors and ask to make payment arrangements for overdue debts. You can ask for a debt to be partially or completely forgiven. You can contact credit bureaus to have outdated items removed (within the guidelines of the Fair Credit Reporting Act) when creditors have not done so in a timely manner. Many clients that have come through Home Start have repaired and restored their credit entirely on their own. It is up to the individual to do the legwork and follow through with the necessary payments. It takes patience - and time - but the results will be worth the effort. If your credit is in such poor shape that you do not think you will be able to repair it on your own, you might want to seek the services of a credit counseling agency. Be sure you select a licensed, reputable agency and that you are satisfied with the progress.
Back to Home Start, Inc. Delta Real Estate Homes of Hope People First The Salt & Light Co., Inc. Contact Us

General Qualifications for Purchasing a Home

You must qualify for a mortgage in order to become a homeowner. No down payment, closing cost, or subsidy program available will be of any use if you do not meet the other requirements to obtain the mortgage you need to purchase a home. Credit is not the only factor that determines whether or not a borrower is qualified, but is most commonly the factor that disqualifies a potential borrower.

At Home Start, Inc., we can help buyers who are not yet qualified for a mortgage to obtain one through reputable lenders who are offering good loan programs for first time homebuyers. We cannot fix your bad credit for you.

I have never seen my credit report. How can I obtain a copy?

In 2004 the Federal Trade Commission made it possible for residents across the U.S. to obtain one free copy of their credit repot from each of the three major credit reporting bureaus once every 12-month period, and may do so through a single, centralized source. Previously, New Jersey residents could obtain free reports once per year, but had to contact each of the three bureaus separately. To obtain copies of your credit reports from Equifax, Experian and TransUnion, visit annualcreditreport.com, call (877) 322-8228, or complete the Annual Credit Report Request Form and mail it to: Annual Credit Report Request Service, P.O. Box 105281, Atlanta, GA 30348-5281.

While the reports are free, your credit score is not included unless you opt to pay a fee to obtain it. While it is important to see your credit profile, it is not always necessary to see your score, especially if you know you will be in the early stages of working on repairing your credit. What your score is today is irrelevant to where it will be once you have reached your credit goals.

How NOT to obtain a copy of your credit report:

Signing up for a credit monitoring service of some kind just to receive a free copy of your credit report is not recommended. Steer clear of those that offer a "Free 30-Day Trial," particularly if you are the type of person who frequently forgets to cancel during your free membership period - and finds a rather large fee charged on your next credit card statement. Should you already subscribe to such service, and find it to be useful in your situation, then you will benefit from the free credit reports that are often included. If you do not use this type of service, you might choose to go the route of paying outright for a copy of your credit report first. This is likely to be the less expensive alternative to signing up for an annual monitoring service.

We recommend that all clients first through the Annual Credit Request Service to obtain their own reports for free, but if you have need to obtain additional reports during the twelve-month time frame, Home Start has an account with a credit reporting service and has the availability to obtain a tri-bureau, merged report with a $20 individual/$30 joint fee and your signed authorization. For us to do so, you must complete the Homebuyer Information form, sign for authorization, include the fee, and mail the documents to us. This report, unlike the free copy you obtain once a year, appears as an inquiry on your credit profile, so we never recommend it as the first option.

I think my credit is good. Now how do I know if I qualify for a mortgage?

There are four things lenders will consider before approving a mortgage application. These are known as the Four C's: credit history, capacity, capital, and collateral.

Credit History

Generally speaking, you must have three current trade lines with at least a two year history. You cannot have any delinquent accounts or late payments within the past 6-12 months, and no charge-offs, collections, judgments or liens. Lenders will evaluate you in terms of risk. Your credit history tells the bank or mortgage company what amount of risk they are taking on by granting you a loan.

Capacity

This refers to your ability to repay the loan, based on your income and resources. Lenders do not like to make loans so large that you are spending more than a reasonable portion of your monthly income to make the payments - usually no more than 30-35% or your earnings. In addition, your other debts must be reasonable so that your credit is not overextended as a whole.

In evaluating your capacity, lenders look at your occupation, your earnings, and the length of your employment. Two years or more of employment at the same job, or in the same line of work at different jobs, is usually required. Any part-time income you wish to include must also have a history of 2+ years to apply toward your earnings. If you have a stable income with a good employment history, and the lender determines that you can reasonably make your mortgage payments each month, then you will have the capacity to repay the loan.

Capital

Capital refers to your money in the bank. You must be able to pay down payment, closing costs, and any other associated fees (such as homeowners insurance) in order to receive a loan. You will be required to show two months or more of bank statements and document any large deposits or withdrawals that the lender cannot otherwise account for. Any gift funds that are received must also be documented and accounted for. You should speak openly with your lender up front if you plan to receive a gift and require those funds to purchase your home. Some loan programs limit the amount of the gift you receive and restrict who can actually give you the money.

Collateral

The property you purchase is posted as collateral against the loan that you borrow from the lender. As such, it must be a "fair trade," or adequately support the value of the loan. You cannot borrow $100,000 from a lender if the home is only valued at $90,000. In order to verify the value of the property, the lender orders an appraisal, an individual assessment of the property's market value.

What if I have problems with my credit?

The most important thing that many individuals with credit problems may or may not be aware of is that you have the power to negotiate and repair your own credit. You can contact your lenders and creditors and ask to make payment arrangements for overdue debts. You can ask for a debt to be partially or completely forgiven. You can contact credit bureaus to have outdated items removed (within the guidelines of the Fair Credit Reporting Act) when creditors have not done so in a timely manner. Many clients that have come through Home Start have repaired and restored their credit entirely on their own. It is up to the individual to do the legwork and follow through with the necessary payments. It takes patience - and time - but the results will be worth the effort.

If your credit is in such poor shape that you do not think you will be able to repair it on your own, you might want to seek the services of a credit counseling agency. Be sure you select a licensed, reputable agency and that you are satisfied with the progress.

Back to Home Start, Inc.

Delta Real Estate Homes of Hope People First

The Salt & Light Co., Inc. Contact Us