How To Qualify For A Mortgage Loan
Owning a house may be a dream that you've always had, but getting here can be quite the process. Before you start house hunting for the perfect place to call home, make sure that you get yourself financially prepared. The first step is getting pre-qualified for a mortgage loan, but if you have never done this, then there are a few things that you can do to ensure that you get the most significant amount, the lowest rate, and the best overall deal.
Watch Your Credit Score
One of the first things that lenders look at when they try to pre-qualify you for a mortgage is your credit score. The average credit score (and where you want to shoot to be) is at a 640 and above. If you have anything over a 750 credit score, that means that you have an excellent credit rating. Although you may still qualify for a mortgage with a credit score under 640, you won't get as good of an interest rate.
Look at Your Debt to Income Ratio
If you have too much debt, then you won't be able to afford a mortgage, but if you don't have a lot of debt, then you will be able to afford a mortgage. On average, home lenders look to see if your debt is 36% or less of your total monthly income. If it is, they are able to determine if you will still be able to afford a mortgage, homeowners insurance, utilities, food, and gas every month. If your current debt is higher than this amount, try to get rid of as much debt as possible so that you lower that amount.
Save for a Down Payment
Another thing that lenders will look at is bank records to make sure that you have enough money to put down. Depending on the type of loan that you get you can put down as little as about 4% or you can put as much down as you would like. Typically, people will put about 15-20% down on a conventional loan, but you can talk to your lender about what is best for you. Try to save all of your money until you have your down payment.
Having a house to call your own is part of the American dream, but before you can get there, there are a few things that you have to do to get ready for a mortgage. Contact a lender like Unison Bank to learn more about mortgage loans.