Qualifying for a Home Mortgage

While it is true that some of the lending guidelines have tightened up, many buyers are still able to qualify for a mortgage in today’s market. Wondering what you need to qualify?

1. Credit score. You must have a “good” credit score to qualify for a mortgage. FHA is much more lenient and will typically accept credit scores of 580 or higher. For convention loans, lenders require at least a 620. The best rates are available to buyers with higher credit. The higher your credit score, the more assurance the lender has that you will pay them back due to your your history of making timely payments on your debts and bills.

2. Downpayment. Most mortgages require a downpayment. For FHA, the minimum is 3.5% of the purchase price and for conventional loans, 10-20%. You will also need additional cash to pay for closing costs and in reserve to cover expenses that will come up after you move in.

3. Debt to Income Ratio. Lenders are not just looking at income but rather they want to see what your debt load (i.e. car loans, credit cards, school loans, etc.) is in comparison to your gross income (i.e. before taxes). There are two ratios lenders look at, front-end (housing expenses) and back-end (total debt-to-income).

4. Documentation. Lenders want to see proof of your financial situation. You will be asked to provide paycheck stubs, bank account statements and past tax returns. If you are self-employed, additional documentation may also be requested.

Nothnagle offers two mortgage partners, Nothnagle Home Securities Corp and Premium Mortgage. If you would like more information on what you need to do to qualify for a mortgage, contact a Nothnagle agent directly or call one of our mortgage partners today.

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