Requirements to Qualify for a Mortgage Loan

For those who are planning to qualify for a mortgage loan, here are the requirements for it: 1. Credit - your credit is one of the most important things that will be considered when determining if you qualify for a home loan. It…

For those who are planning to qualify for a mortgage loan, here are the requirements for it:

  1. Credit – Your credit is one of the most important things that will be considered when determining if you qualify for a home loan. It’s also one of the things that most people don’t know a lot about. Your credit history is how a lender will judge the likelihood that you’ll pay back the money they lend you. To do this, a lender will look at the length of your credit history, how reliably you’ve paid on your loan accounts and if you’re maxed out on credit cards or loans. These are also the factors that determine your credit rating or credit score. Your credit score will be used to qualify you for a mortgage and will often determine the interest rate you will be offered.Credit scores used for a mortgage range between 350 (low) and 850 (high). A healthy credit score is generally considered to be above 740 and a poor credit score is anything below 600. The higher your credit score, the better the interest rate you’ll likely be offered. For most lenders, the minimum score to qualify for a home loan is 620.In addition to your credit score, lenders will look at items on your credit report. They’ll want to see that you’ve had accounts open for at least a year and that you don’t have any large outstanding collections or judgments against you. If you have collections or judgments on your credit report, you will usually have to take care of those first before you can get financing (the one exception to this is usually medical bills). The other thing that won’t show up on your credit report, but is verified, is your rental history. Lenders want to see if you’ve had any late rent or mortgage payments in the past 12 months. Any more than one late payment and you’ll have a tough time getting approved. Source: Quizzle Wire
  2. Limited Debts – Lenders generally require that your monthly home ownership costs, plus other monthly debt payments – such as car loans, student loans and credit card bills – be no greater than 36 percent of your gross monthly income. Mortgage lenders look at your debt-to-income (DTI) ratio to determine how much this amount is, and how much you can afford to borrow. This ratio is calculated by dividing your pre-tax income by the amount used to pay off debts on a monthly basis. Your credit card payments are included in this calculation as the minimum payment required, not the amount you owe each month. Your total potential mortgage payment should include taxes and property insurance. Source: Lending Tree
  3. Employment History – Job stability is a factor that a mortgage lender will look for, and 2years at your current job helps, but this also is not an absolute requirement. If you change jobs, but stay in the same line of work, you should not have a problem – especially if the job change is an advancement or increase in income. Source: Home Loan Learning Center
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