How To Qualify For A Home Loan
Posted on January 28, 2012 | Category: Mortgage
You might be wondering, what you need to qualify for a home loan. Do not worry since you are not the only one thinking how your mortgage loan will get approved. Anyone who took the plunge into home buying know that the application process for home loans is very straight-forward. You have to fill up the form, submit the requirements, verify your income, and wait for the bank or lender to contact you to know if you got approved or not. But what do lenders really look for in an ideal mortgage borrower? Knowing what will make you eligible for a mortgage loan will increase your chance of getting the funds you need to afford the home of your dreams.
Low Debt-To-Income Ratio
Lenders will always favor borrowers with low debt-to-income ratio. This means that your existing debts plus the cost of your monthly mortgage payment must not exceed thirty-six percent of your gross monthly income. DTI ratio will be calculated by the lender to know if you are capable of making the monthly mortgage payments.
Good Credit History
Maintaining a good credit history can greatly influence your mortgage loan eligibility. Needless to say, borrowers with excellent credit history are highly likely to get approved. Meanwhile, those with bad credits may have a hard time convincing lenders that they are worth the risk. But no need to despair since there are now loans designed specifically for borrowers with bad credit. If you don’t qualify for the conventional mortgage loan, then you can opt to apply for a loan made for people with bad credit scores.
Ability to Pay the Downpayment
It is a good idea to have saved up money to pay for the downpayment. Lenders would surely want to know how much you would be willing to pay for the downpayment. Ideally, you would want your loan-to-value ratio or LTV to be eighty percent or less. If in case you have an LTV ration higher than what is ideal, then you might need to purchase a private home insurance. You will also be asked to submit bank statements to verify that you have the funds to pay for the downpayment.
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