When you want to buy a home, you will be faced with many decisions. The first is whether you are actually ready to buy. Finding the right home is not always easy, and getting a mortgage loan can be time-consuming and complicated. To help you decide if you’re ready to buy, we’ll take you through the steps a mortgage lending institution uses to decide if you qualify for a mortgage loan.

When you take out a loan, you sign documents that say you promise to pay back the loan. When a mortgage lending institution makes your loan, it has determined that there is a good likelihood that you can keep that promise. The mortgage lender knows that it does not help you or the lending institution if you are given a loan, but then, for any reason, are unable to make the payments each month.

To decide if you will be able to repay the loan, the lender will look at many different pieces of information about you. This process is called “underwriting.” These pieces of information show how well you have repaid your debts in the past, whether you are likely to repay your debts in the future, and your ability to repay the mortgage and your current debts.

There are some general guidelines that help a lender in looking at these pieces of information about you. But you should also remember that there is some flexibility in these guidelines, because everyone’s financial situation is different. If you are very strong in one area, it may help balance out another area in which you aren’t quite as strong.

This is important. Having a steady job helps you to keep your promise to pay back a mortgage loan. If you have been working continuously for two years or more, you are considered to have steady employment.
A lender will need to know your job history, and it will be a major factor in whether you qualify for a loan. However, you do not have to have held the same job for two years in order to be approved for the loan. Job moves that result in equal or more pay and continue to use proven skills are a plus for you.

If you have been working continuously for less than two years, the mortgage lender will look for an explanation. There may be a good reason:

■  You may have been discharged recently from the military or just finished school

■  Your work may be seasonal, and you might have work gaps between seasons.

How you paid your bills in the past gives a lender some indication of how you can be expected to pay them in the future. When you apply for a mortgage, you will be asked to list all your debts, the amount of your monthly payments, and the number of months or years left to pay on the debts.

Your lender will order a credit report to verify the information that you give and to check on how well you have kept your promises to repay your debts. Credit reports are provided by credit reporting companies that make inquiries through a wide range of available sources of information: banks that may have given you a car loan, credit card companies, even gasoline companies and department stores that offer credit cards.

It’s important to disclose all debts and any difficulty you may have had in the past in repaying these loans. It’s also important not to leave out any information about money you owe. Credit reporting companies have access to a great deal of financial information about you, and they make it available to lenders who
will be reviewing your loan application.

When you buy a home, you will need money that you have saved for a down payment and “closing costs.” The amount of the down payment may vary, but generally you must make a down payment that equals at least 5 percent of the purchase price. You will also need money for closing costs. These costs can be expensive, depending upon where you live. Sometimes the property seller is willing to pay part of your closing costs.

If you have tried to buy a home, but were unable to get approved for a mortgage, you should try to find out why the lender did not want to make the loan. Based on the information above, you may already have figured
out why you did not get a loan. Maybe you did not have a steady work history, or you tried to buy a house that was too expensive for your income, or your debt level is too high. If you are unable to figure out why you were turned down, you should ask the lending institution for an explanation. You should also ask what
steps you can take so that you can qualify in the future.

If you have read all the information above, and have received a copy of your credit report, you may be ready to begin the process of buying a home. You may want to call a local real estate agent to show you homes in your area. You may also want to make an appointment with a mortgage lender. You can find the names of lenders in the Yellow Pages of the telephone book. It will take some time working with a real estate agent
to find the right home in the price range that you can afford.

It will also take time to apply for the mortgage, have the lending institution evaluate your application, and have your loan approved. Still more time is required to do all the necessary paperwork and close on your loan. But in the end, you will have a home for you and your family, and you will have achieved an important part of the American dream.

You can view the entire guide by going to: http://www.homebuyingguide.com