{"id":103,"date":"2022-03-30T07:38:35","date_gmt":"2022-03-30T12:38:35","guid":{"rendered":"https:\/\/househackhelp.com\/?p=103"},"modified":"2022-05-18T10:53:42","modified_gmt":"2022-05-18T15:53:42","slug":"steps-for-qualifying-for-a-mortgage","status":"publish","type":"post","link":"https:\/\/househackhelp.com\/steps-for-qualifying-for-a-mortgage\/","title":{"rendered":"Steps for Qualifying for a Mortgage"},"content":{"rendered":"\n<p>Buying a home requires financing in most cases. Homebuyers usually don\u2019t have the cash to buy a home outright, so they need a mortgage. That&#8217;s not such a bad thing; in the U.S. especially, buyers can take advantage of amazing long-term financing terms. Getting approved for a mortgage often seems overwhelming, but when you know what to expect, it\u2019s not as bad as it seems! This article will explain qualifying for a mortgage so you can be a prepared buyer.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\">Qualifying Factors for a Mortgage<\/h2>\n\n\n\n<p>Lenders look at many factors including your credit score, income, debt-to-income ratio, down payment, and the home itself. Check out the qualifications you need to secure mortgage financing.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\">Credit Score<\/h3>\n\n\n\n<p>Your credit score is the first impression lenders have of your financial worthiness.<\/p>\n\n\n\n<p>It\u2019s important that you make it as good as possible! Not only will it help you in qualifying for a mortgage, it directly influences the interest rate you&#8217;ll have to pay.<\/p>\n\n\n\n<p>Ideally, a credit score of 680 gets your foot in the door with the best loan programs. That doesn\u2019t mean you can\u2019t get qualified without this score, as government-backed programs, such as the FHA loan have credit score requirements as low as 580.<\/p>\n\n\n\n<p>Generally speaking, a credit score over 720 should get you the best rates on most mortgage loans.<\/p>\n\n\n\n<p>The higher your credit score, though, the better the loan program you can secure, along with a lower interest rate.<\/p>\n\n\n\n<p>Lenders charge higher rates and closing costs for borrowers with lower credit scores.<\/p>\n\n\n\n<figure class=\"wp-block-image size-full\"><img loading=\"lazy\" decoding=\"async\" width=\"1024\" height=\"683\" src=\"https:\/\/househackhelp.com\/wp-content\/uploads\/2022\/03\/improving-your-credit-score-for-a-mortgage.jpg\" alt=\"improving your credit score for a mortgage\" class=\"wp-image-177\" srcset=\"https:\/\/househackhelp.com\/wp-content\/uploads\/2022\/03\/improving-your-credit-score-for-a-mortgage.jpg 1024w, https:\/\/househackhelp.com\/wp-content\/uploads\/2022\/03\/improving-your-credit-score-for-a-mortgage-300x200.jpg 300w, https:\/\/househackhelp.com\/wp-content\/uploads\/2022\/03\/improving-your-credit-score-for-a-mortgage-768x512.jpg 768w\" sizes=\"(max-width: 1024px) 100vw, 1024px\" \/><\/figure>\n\n\n\n<h3 class=\"wp-block-heading\">Ways to Boost your Credit Score<\/h3>\n\n\n\n<p>If you\u2019re thinking your credit score isn\u2019t as high as it should be, use these simple tips to increase your score before getting approved for a mortgage:<\/p>\n\n\n\n<ul><li><strong>Get your payments current<\/strong>. Late payments hurt your credit score the most since your payment history makes up 35% of your credit score. Bring all payments current and keep paying your bills on time to increase your score.<\/li><\/ul>\n\n\n\n<ul><li><strong>Lower your credit utilization<\/strong>. The amount of credit you have outstanding compared to your credit line makes up 30% of your credit score. Ideally, you shouldn\u2019t have more than 30% of your credit line outstanding at once. For example, a $1,000 credit line shouldn\u2019t have more than a $300 balance.<\/li><\/ul>\n\n\n\n<ul><li><strong>Keep your accounts open<\/strong>. Your length of credit history is important. It gives lenders a chance to see your patterns. Even if you pay a credit card off and don\u2019t use it, keep it open to boost your credit score.<\/li><\/ul>\n\n\n\n<ul><li><strong>Carry a decent mix of credit<\/strong>. Don\u2019t carry all revolving credit or all installment debt \u2013 have a decent mix to give your credit score the boost it needs.<\/li><\/ul>\n\n\n\n<h3 class=\"wp-block-heading\">Proving your Income<\/h3>\n\n\n\n<p>Lenders need proof of the income you say you make. They\u2019ll ask for:<\/p>\n\n\n\n<ul><li>Paystubs covering the last 30 days (4 paystubs if paid weekly, 2 if paid bi-weekly)<\/li><li>W-2s for 2 years if you work for an employer and don\u2019t earn 100% commission<\/li><li>1099s for the last 2 years if you are a contractor or sole proprietor<\/li><li>Tax returns for the last 2 years if you\u2019re self-employed, a contractor, or a business owner (partnership or corporation)<\/li><li>Other documents as they need them<\/li><\/ul>\n\n\n\n<figure class=\"wp-block-embed is-type-video is-provider-youtube wp-block-embed-youtube wp-embed-aspect-16-9 wp-has-aspect-ratio\"><div class=\"wp-block-embed__wrapper\">\n<div class=\"container-lazyload preview-lazyload container-youtube js-lazyload--not-loaded\"><a href=\"https:\/\/youtu.be\/E-acQjknJCE\" class=\"lazy-load-youtube preview-lazyload preview-youtube\" data-video-title=\"Steps for Qualifying for a Mortgage\" title=\"Play video &quot;Steps for Qualifying for a Mortgage&quot;\">https:\/\/youtu.be\/E-acQjknJCE<\/a><noscript>Video can&#8217;t be loaded because JavaScript is disabled: <a href=\"https:\/\/youtu.be\/E-acQjknJCE\" title=\"Steps for Qualifying for a Mortgage\">Steps for Qualifying for a Mortgage (https:\/\/youtu.be\/E-acQjknJCE)<\/a><\/noscript><\/div>\n<\/div><\/figure>\n\n\n\n<h3 class=\"wp-block-heading\">Debt-to-Income Ratios<\/h3>\n\n\n\n<p>Lenders look at how much debt you have compared to your gross monthly income (income before taxes).<\/p>\n\n\n\n<p>The ideal debt-to-income ratio (DTI) for most loan programs is less than a 45% total DTI.<\/p>\n\n\n\n<p>This means your total debts are less than 45% of your income. Your total debts include your credit cards, car loans, student loans, and other installment loans, <em>plus<\/em> the new housing payment.<\/p>\n\n\n\n<p>If it exceeds 45%, you won&#8217;t be approved in many cases, or loan terms will be much worse.<\/p>\n\n\n\n<p>If you are a <a href=\"https:\/\/househackhelp.com\/category\/house-hacking\/\" target=\"_blank\" rel=\"noreferrer noopener\" title=\"House Hacking\">house-hacker<\/a>, keep in mind that the income you bring in from your rented units counts as income. Lenders use the projected income based on the area\u2019s average rent to qualify you for the loan.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\">Saving Your Down Payment<\/h3>\n\n\n\n<p>Your down payment is a crucial piece of the puzzle when getting approved for a mortgage.<\/p>\n\n\n\n<p>While there are programs that require no down payment, most borrowers need at least 3.5% down for FHA financing or 5% down for conventional financing (3% for first-time homebuyers).<\/p>\n\n\n\n<p>It\u2019s important to save early for your down payment. You may need thousands of dollars to put down on the home.<\/p>\n\n\n\n<p>Even if you live paycheck-to-paycheck, saving for a down payment is as simple as:<\/p>\n\n\n\n<ul><li>Cutting the cord on cable<\/li><li>Easing up on eating out or entertainment<\/li><li>Shopping sales and using coupons<\/li><li>Getting cheaper insurance<\/li><li>Shopping for cheaper cell phone rates<\/li><li>Working a side hustle for extra income<\/li><\/ul>\n\n\n\n<p>All savings can go to this goal. It will likely take a significant amount of time, but it doesn&#8217;t have to be complicated.<\/p>\n\n\n\n<p>Any money you save can go a long way towards building your down payment.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\">Get a Mortgage Pre-Approval<\/h2>\n\n\n\n<p>Once you\u2019ve prepared your finances as best you can, it\u2019s time to get pre-approved.<\/p>\n\n\n\n<p>Talk with a few lenders to get an idea of where you stand. Each lender has different loan programs and\/or requirements, so shopping around is crucial.<\/p>\n\n\n\n<p>Once you choose a lender, get a mortgage pre-approval letter.<\/p>\n\n\n\n<p>This letter will get your foot in the door with sellers and real estate agents. They want to know that you have the necessary financing to buy the home and aren\u2019t wasting anyone\u2019s time.<\/p>\n\n\n\n<p>Many sellers won\u2019t accept a bid on the home unless you have official proof that a lender will finance you.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\">The Deal with Appraisals<\/h2>\n\n\n\n<p>After you ensure that you\u2019re qualified for a home loan, it\u2019s time to worry about the appraisal.<\/p>\n\n\n\n<p>The property must be worth at least as much as you agreed to pay. If not, you may have to pay the difference between the appraised value and the purchase price as lenders will base your loan amount on the appraised value.<\/p>\n\n\n\n<p>The appraisal plays a large role in your approval, especially if you\u2019re looking for a non-owner occupied mortgage.<\/p>\n\n\n\n<p>Lenders put more emphasis on the property itself than your qualifying factors.<\/p>\n\n\n\n<p>They need reassurance that the home is worth more than enough that if they have to foreclose on the property that they won\u2019t suffer a huge loss.<\/p>\n\n\n\n<figure class=\"wp-block-image size-full\"><img loading=\"lazy\" decoding=\"async\" width=\"1024\" height=\"769\" src=\"https:\/\/househackhelp.com\/wp-content\/uploads\/2022\/03\/qualifying-for-a-mortgage-for-a-house.jpg\" alt=\"qualifying for a mortgage for a house\" class=\"wp-image-176\" srcset=\"https:\/\/househackhelp.com\/wp-content\/uploads\/2022\/03\/qualifying-for-a-mortgage-for-a-house.jpg 1024w, https:\/\/househackhelp.com\/wp-content\/uploads\/2022\/03\/qualifying-for-a-mortgage-for-a-house-300x225.jpg 300w, https:\/\/househackhelp.com\/wp-content\/uploads\/2022\/03\/qualifying-for-a-mortgage-for-a-house-768x577.jpg 768w\" sizes=\"(max-width: 1024px) 100vw, 1024px\" \/><\/figure>\n\n\n\n<p>But, so long as it appraises, you&#8217;ll be just about set for closing on the property!<\/p>\n\n\n\n<h2 class=\"wp-block-heading\">Conclusion &#8211; Qualifying for a Mortgage<\/h2>\n\n\n\n<p>Start preparing yourself for mortgage approval ahead of time.<\/p>\n\n\n\n<p><a href=\"http:\/\/www.annualcreditreport.com\" target=\"_blank\" rel=\"noreferrer noopener\">Check your credit<\/a> and see what you may need to improve.<\/p>\n\n\n\n<p>If your credit needs a boost, take the steps to fix it now.<\/p>\n\n\n\n<p>Also look at your income. Would it be easy to a lender to understand?<\/p>\n\n\n\n<p>Do you have consistent and reliable income?<\/p>\n\n\n\n<p>If not, take the steps to make your income looks as presentable and stable as possible.<\/p>\n\n\n\n<p>In the end, lenders look at the big picture. If you don\u2019t have perfect credit, but you have a large down payment and the home appraises for the right value, you may still be a good candidate.<\/p>\n\n\n\n<p>This isn\u2019t a one-size-fits-all solution. Qualifying for a mortgage is part art and part science. Work with a few lenders to see where you can get the best deal and get your mortgage pre-approval before you start.<\/p>\n\n\n\n<div style=\"height:100px\" aria-hidden=\"true\" class=\"wp-block-spacer\"><\/div>\n\n\n\n<p><em>This website, and any communication stemming from it, should not be taken as financial or legal advice for your specific situation. Consult directly with a licensed financial professional should you need investment advice and consult directly with a licensed attorney directly should you need legal advice. Assume all links are affiliate links. I am an Amazon affiliate.<\/em><\/p>\n","protected":false},"excerpt":{"rendered":"<p>Buying a home requires financing in most cases. Homebuyers usually don\u2019t have the cash to buy a home outright, so they need a mortgage. That&#8217;s not such a bad thing;<\/p>\n","protected":false},"author":1,"featured_media":179,"comment_status":"open","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_mi_skip_tracking":false,"footnotes":""},"categories":[13],"tags":[19],"aioseo_notices":[],"acf":[],"_links":{"self":[{"href":"https:\/\/househackhelp.com\/wp-json\/wp\/v2\/posts\/103"}],"collection":[{"href":"https:\/\/househackhelp.com\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/househackhelp.com\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/househackhelp.com\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/househackhelp.com\/wp-json\/wp\/v2\/comments?post=103"}],"version-history":[{"count":2,"href":"https:\/\/househackhelp.com\/wp-json\/wp\/v2\/posts\/103\/revisions"}],"predecessor-version":[{"id":180,"href":"https:\/\/househackhelp.com\/wp-json\/wp\/v2\/posts\/103\/revisions\/180"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/househackhelp.com\/wp-json\/wp\/v2\/media\/179"}],"wp:attachment":[{"href":"https:\/\/househackhelp.com\/wp-json\/wp\/v2\/media?parent=103"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/househackhelp.com\/wp-json\/wp\/v2\/categories?post=103"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/househackhelp.com\/wp-json\/wp\/v2\/tags?post=103"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}