Qualifying for a Mortgage Loan
There are many ways to buy a home.
One way is to make a cash purchase.
Give the seller the lump sum price he's asking for his home and now you own it.
If you don't have the bank account to right out purchase a property, don't worry.
The most common way to purchase a home is through financing.
It’s simply obtaining a mortgage loan to buy a home and paying a monthly mortgage payment, usually over a 15 or 30 year term.
Where do I get a mortgage loan?
You obtain a mortgage loan from a bank, mortgage broker, mortgage lender, or any other financial institution willing to lend you the funds to purchase real estate.
If you don't have a lender contact me to refer you to a quality Loan Officer that will work with you every step of the way through the buying process.
Documents needed to qualify for a home loan.
Once you start working with a lender they will request a list of your personal documents and information in order to crunch the numbers and see if you qualify.
Any co-signers that might be helping you make the purchase will also have to provide their required documents.
These documents may include:
Recent pay stubs and W-2 or 1099 statements.
Last two years of federal tax returns.
Bank, investing, and retirement statements.
Other proof of income such as or rental income.
There are many factors that affect your ability to qualify but the big four are:
CASH SAVINGS
You need enough money in the bank to pay for a down-payment and cover any possible closing costs.
If you qualify for a government-backed loan, you can put down as low as 3.5% on an FHA Loan and as low as 0% with a VA Loan.
If you go with a conventional loan the down-payment amount can be worked out between you and your lender.
Most look to put down 20% because it allows them to avoid paying mortgage insurance.
Keep in mind, you also need enough money to cover any closing costs debits you might have to close the transaction.
Expect your side of the closing costs to be around 2 to 5 percent of the price of the home.
GOOD CREDIT HISTORY
To get the best pricing on loans you must have at least a 700 credit score.
For the most part, the better your credit score the better interest rate you get on your loan.
If you're young you might not even have a credit score so you would have to start establishing credit.
LOW DEBT
The less debt you owe the better your chance of qualifying for a home loan.
Any credit card debt and car payments will affect your ability to qualify.
If you're in a lot of debt such, as student debt, it can totally kill your qualifying ability, even if you bring on a co-signer.
EMPLOYMENT INCOME
You should have some sort of reliable source of income, whether it's from being self-employed or working a job.
Lenders will ask for recent pay stubs and two years’ worth of W-2 statements.
They also look at your work history and require you have two years of the same work experience.
Lenders have to be certain you are able to make your mortgage payments and not default on the loan.
Conclusion
There you have it.
If you are looking to buy and think you might meet the qualifications, contact me and we will set you up with a reputable lender.
If you're not quite there yet, you should still reach out to a mortgage lender.
Loan Officers don’t mind guiding you and helping you get your house in oder.
They are the financial pros and know exactly what you need to do to be able to qualify for a home loan.
