Whether it’s for home purchase or mortgage refinance, interested home buyers should meet certain mortgage qualifications before lenders decide you’re worthy of a home loan.
Other than the necessary paperwork, borrowers have to establish their financial capability in carrying out a mortgage. These qualifications are what lenders usually look into.
If buying a house is a dream that you want to achieve, all the hurdles and all the hard work will be worth it. But before you take the plunge and begin your home buying journey, research is important. You don’t want to get caught up in all the jargon you’ll hear from lenders.
And for you to be able to keep up with the processes that you’d go through during your mortgage application, it pays to do your own research as well.
What are the usual mortgage qualifications that lenders look into?
You’re going to need to be financially ready when you apply for a loan. Before you go through other mortgage qualifications, it’s important that you’ve had saved enough money to put down on a house. This will also let your lenders see how willing and committed you are in buying a home.
Standard down payment would have to be 20% but if you look around and shop through different lenders, there could be a good chance for you to score low down payment mortgages.
Other than that, there are government-backed loans that, if you qualify, have low down payment requirements. Some of these loans are FHA home loans and USDA home loans.Find out if you qualify for a home loan through our lenders, here.
Lenders would typically need a look at your statement of personal assets. While standards may vary by lender, your income or assets will help them determine if you are financially able to carry out a mortgage.
Your income will also help determine one other mortgage qualification: your debt-to-income ratio.
Your debt-to-income (DTI) ratio will determine how well you manage your debts and monthly dues. To know what your DTI ratio is, your monthly debts and payments are divided by your monthly income.
Ideally, lenders would consider a satisfactory DTI ratio if the borrower spends less than 50% of their monthly income. Keep in mind, though, that there are specific DTI ratio guidelines for different mortgage types and for lenders as well.
Perhaps the most important factor that lenders would look into is your credit score. You’ll have to establish a healthy credit score for you to be considered eligible
Although there are home loans available with lenient credit score guidelines, it still pays to maintain a habit of keeping a good credit score. A poor credit score is considered to be below 600.
When refinancing, the typical amount you can finance is about 95%-98% of your home’s appraised value. If your house happens to have very low equity or “underwater,” you can go for other possible refinance options for you.
In the end, being prepared pays off. Buying a house is such a big milestone for you and it’s only proper that you are very particular with how to make that dream happen.For any questions you might have about mortgage qualifications, click here.