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When it comes to applying for a mortgage to buy a home, lenders are on the lookout for specific criteria. While applying and qualifying for a mortgage is not an insurmountable task, it is important that you rate high in many of the key areas or you are not likely to be approved. Let us take a look at these essential areas.

Job Stability

Lenders like to approve individuals who have held the same job for at least two years if not longer. Jumping from job to job or having holes in your job history will require explanation and is not advantageous in the eyes of a lender.

Owning a Business

If you own a business you must provide a solid history of the success of your business for a two year period. To do this you must either obtain a letter from your accountant that clearly states that you have been in business for a period of two years or else you must be able to show proof of a business license that will identify when your business got its start.

Two Year History

If you do not have a two year job history or have not been in business for two years then you can still apply for a mortgage. If you qualify in the other categories then you are not likely to run into a problem with being approved. For those who fail to meet the two year criteria there are what is known as “No Doc” loans. If you apply for one of these types of loans, your job history does not have to be disclosed or verified. The down side however is that you will pay a higher interest rate on the mortgage.

Income

The two year rule applies with income as it does with job history. The lender will need to see two years worth of W-2 forms as well as your current pay stubs. If you own a business, the lender will take a two year average of the money you have earned based on what shows on the last line of your tax return after everything else has been written off. If you earn a commission income you must be able to account for a two year history and from that the lender will take an average. If your monthly debts equal 41% or less of your gross monthly income then you should be approved for a mortgage.

Down Payment

The traditional amount required for a mortgage is 20% which will put you in good standing with the lender and help you get the best interest rates possible. However putting 5% or 10% down is still something a lender will be pleased to see.

Reserves

Reserves are money that remains in your bank account after you have paid all of your closing costs. Having one month of reserves looks well to a lender and that includes enough money to cover one mortgage payment, your property insurance and all applicable taxes. The reserves you need are dependent upon the type of mortgage you are applying for. As a general rule, having two to six months worth of reserves is considered desirable.

Credit History

Your credit history plays a significant role in whether or not you will be approved for a mortgage and well as what terms will be set down. It is your “fico” score that will be closely scrutinized by the lender and will weigh heavily into the decision of whether to approve your application or not.

Tags: mortgage | lender | credit | home | realty

When credit cards first came into existence there was only one type, the unsecured credit card. If you had good credit and passed all of the relevant criteria, such as a specific income level and working at the same job for a number of years, then you were approved for a credit limit set by the financial institution. Unfortunately many people run into financial difficulties and do not qualify for this type of credit card. Thus the door was opened to the secured credit card.

The secured credit card is basically a credit card for individuals with poor credit (such as those who have been discharged from bankruptcy); or those who have a lower income. This type of credit card is one in which you put down your own money as collateral. You may then use the card and borrow in this manner until a time at which the credit card company is willing to consider extending you credit by way of an unsecured credit card. This will happen once you have proven that you can use credit responsibly and can pay your bills on time every month.

In most cases, the limit on a secured credit card is low, in the range of $500 to $1000. This is a small enough amount that the person who is attempting to rebuild their credit should not run into any financial problems. Most companies are willing to consider a responsible credit card holder for an unsecured card after they have been with the company for anywhere from one to two years. The request will be considered on a case-by-case basis. Once you feel you have proven yourself with responsible credit card use, do not be afraid to approach the company about switching to an unsecured credit card.

There are a number of companies that issue secured credit cards but it is important that you look for one that does not charge an application fee. Most have an annual fee as this is a standard practice, but make sure you compare the fees from company to company before you make a final decision.

Another important point of note is that before you apply to any particular credit card company, find out if they make it a habit to report their credit information to all three credit reporting agencies. After all this is a primary benefit that you should take full advantage of.

Tags: credit card | secured credit card | debt | apr | loan

Millions of Americans are seeing inflation in the price of gas and groceries, but they are being told that the heart of the consumer engine is spending. Some will even argue that in some areas, costs have dropped (like housing) and interest rates on loans have fallen, making it an ideal time to buy a home. But, for those struggling to put food on the table and make the long commute to work at the same time, these conflicting messages can be troublesome. If they continue to spend at the level that they can’t support, they may end up having to take a cash advance to help pay for daily expenses, instead of reserving payday loans for emergencies as they are meant to be used. This can put them further in debt, if spending is not curtailed, and new budgets drawn up to accommodate rising prices.

The first thing a budget can help with is figuring where all the money is going. It may surprise some families to realize that they are now making an additional car payment in the form of gas costs just to make it to work. If they aren’t keeping track of the grocery or the gas bill, they won’t be able to see where the biggest savings might come from. They can’t make decisions based on actual numbers and instead might opt for feel good economics instead of some needed hard choices.

Once a budget is drawn up, people know where modifying behavior will make the most financial sense. Maybe carpooling with your spouse and eliminating one car is the way to go to help you meet your expenses during times of high inflation. Maybe shopping at the big warehouse club is actually increasing your grocery bill because it is too far away and it costs more to get there. Maybe, you can find out which foods cost less and can be used to build a menu during the week without making people go hungry in your family. All the little things add up in a budget and can help you to keep your spending in line while continuing to take advantage of specials when they are available.