An estimated 50% of people that once qualified for a home loan no longer do due to tightened lending guidelines. If you are among this group, you understand that just because your credit may be less than perfect, doesnt mean that owning a home is not important to your family.

You may be considering a Rent to Own, Lease Purchase, Lease Option and Owner Financing transaction as a viable alternative to conventional financing.

While this can be a great option for those who are serious about buying a home, a Lease Option transaction is a financial nightmare if you don’t do what it takes to qualify for a home loan by the end of your contract.

You probably understand that a good credit score is critical to obtaining a loan approval. Times have changes and a strong income and cash to put down are no longer enough.

You need to begin repairing your credit immediately. The first thing you will want to do is pay off any current collections and pay your credit cards off.

Ideally, you want to have at least four credit cards that arent maxed out. The reason for this is that a component of your credit score is the percentage of revolving credit that you have available. This means that your score will be higher if you owe $500 and have $10,000 available than if you owe $500 and only have $2000 available.

Finance company loans should be paid off as soon as possible. While bank loans will positively impact your score, (as long as they are paid on time) finance company loans actually hurt your score. This is because most people seek finance company loans when they are desperate for cash and because of this, they are considered a sign of financial weakness.

While focusing on your credit is the first step, that isnt all you need to accomplish. What other factors will come into play when it comes time to apply for a home loan?

Other things that are important include job stability and income. Two years with the same employer is ideal. If you have changed jobs, this may be ok, provided the job changes were for career advancement.

If you are self-employed, qualifying for a mortgage is especially difficult due to changes in loan programs. Most people that are self-employed are taking full advantage of the tax code, and as such, do not show much income.

While stated income loans were once popular among self employed individuals, they are no longer available. If you are considering a lease purchase or lease option, it is important that you begin documenting your income immediately. Lenders will require at least two years of documented income.

Beyond credit and income, there are other things that can play into a loan approval. While once those who were not US citizens could qualify for a mortgage without much trouble, this has become significantly more difficult. Non-citizens should be prepared to have established credit files and significant cash down. Even then, approval is not a sure thing.

If you begin immediately working on your credit as well as other factors that will impact your mortgage approval, you can own your own home in no time!