First-Time Home Buyer: What to Include in Your Mortgage Application

As a first time home buyer, you will be facing more difficulty securing a loan at a low interest rate. Because you do not have a record of successful performance on a mortgage, your application must show you are credit worthy despite this gap. Your application shows more than just your financial capabilities; it should also show your character and responsibility for commitments.

Debt History

The first thing you will have to show any lender, not just a mortgage lender, is you have performed well on past loans. Of course, your lender will complete a credit check to look into your credit score. An essential part of this check will be the lender's review of your credit history. Here, the lender will be able to see the types of debt you have carried in the past. It is best to show you have managed an installment loan previously.

An installment loan, like a mortgage, is given in one lump sum paid off through several installments. Since a mortgage loan operates this way, your lender wants to see you understand and can perform under these circumstances. Before seeking your first mortgage, pay off a student loan, personal loan or car loan. This will make the mortgage lender more assured of your ability even though you are a first-time buyer.

Income Statements

You need to provide proof of your income in order to qualify for a mortgage loan. All mortgage lenders now require proof in the form of a statement from your employer, paycheck or other format. It is best if you, or you and your co-applicant, have stable employment with a large company. Those who work for small businesses or are self-employed pose a greater risk.

It is also best to be able to demonstrate job stability of more than two years, with a consistent or increasing salary. Multiple internal promotions will help show you have reason to believe your income will continue to grow in the future.

Character Statements

Finally, you can provide supplemental information regarding your character and responsibility to assist your mortgage lender in deciding you are credit worthy. These statements should be from previous business contacts who know your history of making consistent payments. Personal statements from family members do not suffice to serve as a risk-mitigating factor.

You may consider asking for a reference from your previous landlord. Paying rent and paying a mortgage are very similar. If you have consistently made rent payments on time for a number of years and managed your property well, your landlord is a good resource to attest to your future ability to own a home and pay a mortgage.