Do These 4 Things To Guarantee You Get Approved For Your Knoxville Mortgage

For first time buyers, one of the biggest hurdles of buying a Knoxville home is getting approved for a mortgage.

Here are 4 things to guarantee you get approved for your Knoxville mortgage.

Steady Income

Income is important when it comes to getting approved for a mortgage. When you take out a mortgage, you’re borrowing a large sum of money. In order to get approved for a mortgage, a mortgage company wants to see that you have regular, steady income. This shows that you will be able to repay a loan

There are certain loans, like an RD loan, that requires that you show at least two years of steady employment. While not all loans have this requirement, you’ll still be required to show that you’re making a steady income.

If you’re self-employed or get a portion of your income from commissions or bonuses, generally you will be required to show at least two years worth of income in order for that income to be counted. The reason for this is that a lender wants to see that your income is consistent.

Low Debt

An important thing for loan approval is debt-to-income ratio. Your loan officer will look at how much debt you have in order to determine how much you can afford when you buy a home.

Debt-to-income ratio is a simple way that lenders measure your ability to make payments. It measures how much debt you have compared to your gross monthly income (i.e. income before taxes). To figure out your DTI, you take all your monthly debt divided by your gross income. For example, if you make $4,000 a month and you have $1,575 in total monthly debt, your DTI is 39%.
DTI is a good way to show lenders how much of your current income currently goes towards your monthly debt. Things like student loans, car payments, and credit card debts are all things that can add up quickly. If you’re so overspent on your current monthly debts, your DTI will show that you may not have enough room for a mortgage based on your current debts.

Credit Score

One of the first things a lender will look at when you talk about applying for a loan is your credit score. A credit score shows a lender that you’re able to repay a loan.

Credit score requirements vary by lender and by loan type. But, there are some general standards for what the minimum requirements are to get approved for a loan:

  • FHA loans generally require at 580 or higher
  • Conventional loans generally require a 620 or higher
  • VA loans don’t have a minimum score, so it depends on the lender
  • Rural Development loans generally require a 620 or higher

While these figures are the general guidelines, they aren’t true for all lenders. Some may have tighter guidelines, while others will have looser guidelines.

The better the credit score the better rate you’ll get when you apply for a loan. When you get a lower rate, you’ll save yourself more money. The type of rate you’ll get based on your credit will depend on your mortgage company and loan type, so feel free to check around.

Cash Reserves

Finally, cash reserves another important part that can help with loan approval. Having enough cash on hand for a down payment as well as for emergencies can show a mortgage company that you’ve got enough income saved up in case of an emergency.

When you have enough cash on hand for a down payment, you’ll find that you have more loan options available to you. While not all Knoxville mortgages for first-time buyers require a down payment, there are more options out there when you do have a down payment. This is not to say that you need to have 20% down. You can still get into a home with a small down payment.

Buying your first Knoxville home is an exciting and overwhelming experience. If you’re like most first-time buyers, you may not be sure where to start. If there is anything we can do to help you in your home search, please do not hesitate to contact us. We’ve helped countless homeowners buy their first home and we’d love to do the same for you. Rick can be reached at 865-696-9002 or via email at Rick@KnoxvilleHomeTeam.Com. Kati can be reached at 865-696-1888 or via email at Kati@KnoxvilleHomeTeam.Com.

Are you ready to start your home search? Visit our home search page to get started today. Or, be sure to keep up with our Knoxville First Time Home Buyer’s Blog to keep up with the latest information about buying your first home.