What Do You Need to Qualify for a Mortgage?
The dream of owning a home often feels out of reach, but it isn’t impossible to qualify for a mortgage. Every year, thousands want to take the first steps to own a home but hesitate because they don’t think they’ll get a mortgage qualification.
It could be because they fear the process, made some credit mistakes in the past, or don’t feel they make enough money to own a home. Many don’t know the mortgage requirements, so they assume they won’t qualify.
What Do You Need to Qualify for a Mortgage?
We’ll examine what you need to qualify for a home mortgage and put you on the path to success.
Qualify For a Mortgage: You Need Steady Income
A mortgage is a loan. The bank determines if you qualify by balancing the risk of defaulting with the likelihood of you completing the loan. The mortgage requires you to make a monthly payment for the duration of the loan.
Your income is a critical factor in determining whether you get a mortgage. A steady income shows that you likely have the money to pay. The bank wants to see pay stubs and bank statements to prove this.
If you don’t or have a history of job-hopping, it makes it difficult to qualify. They won’t provide the loan if you can’t sustain an income to make the monthly payment.
Talk to a Realtor like The Chad Schwendeman Real Estate if you want to know more.
A Down Payment is Key
The less risk the bank must shoulder, the more likely you’ll get the mortgage. A down payment of 10-20 per cent of the home’s total value means they can provide less money. Also, if there is a default when they take the house, there is less chance of losing money.
Some loans from the Federal Housing Authority and the United States Department of Agriculture have lower down payment requirements. The government also backs them in case of default.
If you’re having trouble getting a mortgage, increase your down payment. It substantially decreases the risk to the bank.
Improve Your Credit Score
Your credit score is one of the most important aspects of qualifying for a home mortgage. It is based on your credit and financial decisions. A good credit score means you are responsible with credit, paying it off on time, not having too much debt, etc.
If you default on loans, declare bankruptcy, or have civil lawsuits against you, it lowers your credit score and shows you aren’t reliable enough to make the payments.
If your credit score is below 600, consider waiting and looking for ways to improve it.
Talk To a Lender
If you have these areas covered, you should qualify for a mortgage when you buy a home. You may want to get pre-approved for a mortgage before looking for a home. Pre-approval means you know how much the bank will lend you for a home.
If you want to learn more about a home mortgage, please explore our site.
