Are you hoping to buy a home but not sure if you will qualify for a loan? Owning a home is certainly a major part of living the American dream. It helps to know what mortgage lenders like to see from borrowers so you can prepare properly before starting the process. If you have the following, chances are high that you will be approved for a loan and well on your way to purchasing your first home!
What Mortgage Lenders Like to See From Borrowers: A Decent Down Payment
While not all loans require a large down payment, paying a significant amount of money down is a great way to show good faith to your lender. Many large loans require 20% down, while smaller loans could be as low as 3-5%.
This smaller down payment requirement is typically reserved for first-time buyers. Keep in mind that significant down payments do more than simply put your lender’s mind at ease; they also reduce the loan amount which in turn lowers your monthly payments. It is generally a good idea to put as much down as you can.
One of the most important considerations for lenders is your credit score. It makes sense that a poor credit score would raise some concerns. On the other hand, a high credit score shows your lender that you have experience with the responsible payment of debts and other bills.
Your credit score takes a hit when you apply for too many credit cards or fail to make your payments on time. A history of late payments can hurt your chances of securing a mortgage.
What Mortgage Lenders Like to See From Borrowers: Sufficient Income
Finally, your lender will ask to see proof of income from the last couple of years. They need to know that you have a history of receiving income and the means to pay your monthly mortgage payments. They might ask to see your paycheck stubs, your w-2 form, or your tax return documents. The amount your lender is willing to loan you is determined in part by taking a look at your total household income. You can see an estimate of how much you might be able to borrow by searching online for a mortgage calculator.
Before starting the hunt for your future home, it is a good idea to first get pre-approved for a loan from a reputable financial institution. They will send you a pre-approval letter that you can use to show sellers that you will have the funds to purchase their home. Many sellers will only accept an offer if you can show them this proof of funding from your lender.
Did you enjoy reading this article? Here’s more to read: How to Use Your Home Equity in Retirement
Steelbridge Realty LLC is a Licensed Real Estate Brokerage that utilizes cutting-edge marketing techniques and data-driven Real Estate solutions in today’s ever-changing environment. Our group of professionals have decades of experience and have navigated through many business cycles. Our diverse background gives us the tools to guide people towards successful decisions.