If you're thinking about buying a home, it’s likely that you’ve also wondered how to qualify for a home loan. Contrary to how some might feel, applying for a loan isn't mysterious or difficult. In this post, we’ll discuss the four main aspects that lenders will review when you apply for a home loan. This way, you’ll feel confident and prepared for every step of the home-buying process.
What Mortgage Lenders Review When You Apply for a Home Loan
Credit Score
Income and Employment History
Assets, Liabilities, and Debt-to-Income Ratio
Loan Type and Amount
Credit Score
First, mortgage lenders review your credit score to determine your risk to their company as a borrower. A higher credit score indicates that you have established a history of responsible borrowing—in other words, you are less likely to miss payments or become a risk to the lender.
However, don’t start to worry just yet if your credit score is less than ideal. After all, lenders look at four main areas before deciding to approve a home loan application. (In fact, you can still be approved for a home loan even if your credit history reflects bankruptcy or foreclosure.)
Income and Employment History
Next, lenders evaluate your income and employment history. They may request to see at least a month’s worth of pay stubs among other related documents. This step shows the lender that you have a stable income and can afford to make your monthly mortgage payments.
Assets, Liabilities, and Debt-to-Income Ratio
Similarly, when you apply for a home loan, a mortgage lender will review your assets, debt-to-income ratio, and other financial liabilities and responsibilities. In contrast to income, which demonstrates your ability to make long-term, future payments, lenders also check your current financial situation to make sure you have enough funds now to cover your down payment and closing costs.
Home Loan Type and Amount
Finally, mortgage lenders consider what type of loan you’re applying for and the amount of the loan. Depending on the type you choose, it may have different requirements or restrictions. An experienced mortgage lender will help you choose the right mortgage for your specific situation.
You Can Qualify for a Home Loan Now
Qualifying for a home loan isn’t hard, and it’s a necessary step to take when looking for your dream home. Lenders will review your credit score, income, liabilities, and loan specifics before approving you for a home loan that fits your lifestyle and budget.
Get started now and see just how much you could be pre-approved for—it may be more than you think!
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