How Do I Qualify for a Mortgage?
So you're ready to buy a home and you're doing the diligence to get approved for a mortgage to see how much you can afford, before you start shopping.
Now, qualifying for a mortgage. Where do you start, what do you need, and what are the steps? Nowadays, it takes a bit more to get approved for a mortgage than it used to. You need several documents prepared, a clean credit history, on top of a verification process from the lender getting you the mortgage. So what is it you need and what are the steps to take in order to START SHOPPING!
What you'll need to qualify for a mortgage:
saved Down Payment
- Depending on the loan type, down payments range from 3%-20% and even more of the purchase price. The more down payment you have, the more house you can afford. It's encouraged to have a strong savings.
Income verification, credit history, and asset verification
Some documents that can be used as proof of income for a home purchase include your w-2's, bank statements, pay stubs, a look back at your credit history including checking our score, tax returns, and more.
Third Party Appraisal
- An appraisal is an independent, professional opinion of value. An appraisal helps establish a property's market value - the likely sales price it would bring if offered in an open and competitive real estate market. Appraisals protect both you and your lender from purchasing an overpriced home or refinancing for more than your home is worth.
- The stability of income is when the lender (underwriter) will measure how likely it is that your income will continue, based on what your previous work history looks like.
Good Credit History
- Borrowers with better credit scores tend to get LOWER interest rates, than those with lower credit scores. As a guide, a credit score of 740 or higher qualifies for the best interest rates from most lenders. It is difficult, but possible, to get a mortgage with a credit score under 620.
Now what are the steps to a qualifying?
1. Gather your credit score and history
- Avoid starting out with any surprises- check this yourself beforehand. Typically, banks offer free credit checks, but you can also use resources like Credit Karma.
2. Start gathering documentation (income verification, credit history, and assets)
- W-2's, bank statements, pay stubs, and savings verification. Actual documents will vary.
3. Contact and consult a lender
- To determine how much you can afford. Your real estate agent can definitely provide you with lenders they know and trust.
4. Work with lender for mortgage best suited for you
- There are several programs out there. Work with the lender to determine which loan program is best for you.
5. Get pre-approval letter
- This letter provides an estimate of how much you can afford and will be paramount when you're ready to make an offer on a home.
6. House shop!
- After you're pre approved, you're now ready to work with your realtor to start shopping!!!
Now you have a general idea of process, I can't hence the importance of working with a professional to solidify everything. Your realtor can get you in touch with a trusted lender to stat the process of qualifying for a mortgage. Ready to start your home buying journey? Reach out and we'll make sure you're taken care of.
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