Those who have low-income will always face problems when it comes to getting approved for home loans. And it is not only with mortgages, but also with getting approved for credit cards and other type of loans. However, this does not mean that all is completely lost if you have low-income, and you would want to own your own home. There are a few steps you can take to get approved for a mortgage, despite your income status.
(1)The Federal Housing Administration, FHA, Loan program. The program helps those with low income to acquire their own homes. We will discuss how to go about the application process and all that you require to get you approved later in this article.
(2) Using your assets such as a car as collateral to get the mortgage.
(3) Using a co-signer, also known as co-debtor to apply for the mortgage with you.
OK so let’s get into the details of each option.
The FHA Loan Program for Those with Low Income Levels
1. The Federal Housing Administration, FHA, Loan program is there to assist people who have low incomes to acquire their own homes. It is specifically called the FHA 203 Loan program.
So how do you qualify? To qualify for the FHA loans program, you need all your personal finance documents available. Also if you have any assets, ensure the documents covering them are also made available.
So what happens when you submit your application for the FHA program? Your income-to-debt ratio is determined. This ratio is simply how much debt you have compared to the amount of income you have, including all your assets. It is worth noting that this test differs from state to state.
The test is conducted to determine if there is the slightest possibility of you being able to pay for the loan that is given to you through the program. So your credit score could be borderline good, you can still qualify for this loan and be able to own your house. There are people with a credit score as low as 580 who have been approved for the FHA loan and are now homeowners.
2. So how do you make your application? Go to your mortgage officer. Let them know you want to apply for the FHA 203 home loan program so that they can give you the appropriate application forms. Fill the forms out. If there is something you do not understand, let the mortgage broker help you out.
3. One thing you need to understand about the FHA home loans program is that the loans have fixed interest rates and it stay the same unless you decide to refinance. If you application is approved, you will get a confirmation from the FHA office in your state or from the mortgage broker you used to make the application. So this one option of getting a home loan with a low-income status.
Other Options beside the FHA Loan Program
For some reasons, there may be people who will not be able to qualify for the FHA 203 Home loan program. In that case, you can consider these other options to help you get a mortgage if your income status is low.
4. Using your assets as collateral. Although your income status may not be good, it is possible that you have assets you can use a collateral to help you a home loan. These assets could be your car, bonds and other investments you may have. Talk to your bank about the possibility of using any asset you may have as collateral to help you a home loan.
5. Using a co-signer.
If the two options above do not work out for you, the last option is to consider getting a co-signer to sign the loan application with you. A co-signer is ideally a relative such as a parent, sibling or spouse. They should have an excellent credit score since the banks or financial institution giving you the home loan will make their decision based on the co-signer’s credit rating.
6. Once you get your co-signer, go ahead and make your application for a home loan with a private mortgage lender, using your co-signer credentials as well as yours as well as your own. Typically, you will need to have the co-signer go with you to the offices of the lender to sign the forms. In other cases too you can simply get them to sign the forms and then you would present it to the lender.
7. One characteristic of co-signed loans is that of defaulting. It is important to have clear, documented steps of what will happen to your co-signer if you default on repaying the loan. Co-signer assume responsibility for the loan if you default. So have a clear, written plan in place if this should happen.