How to qualify for a home loan

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The requirements for being approved for a home loan are generally the same across programs, with a few exceptions, and they rely on proving you're in good enough financial shape to take on the cost of a mortgage. You can start to get a general idea of whether you'd qualify or not by using online pre-approval applications

Credit scores, debt ratios, and assets

Most loan programs require a certain minimum credit score. For example, conventional loans require about a 620 to 640 minimum score. FHA loans allow you to have scores below 580, although your minimum down payment will have to be a lot larger than it would be if you had a higher credit score.

Your debt can't exceed a certain percentage of your income, such as 50 percent. Example: Take all your monthly debt that shows up on your credit report plus, your full proposed mortgage payment and divide it by your monthly gross income ( debt / income ). This will give you a ratio. If you fall under 50 percent in most cases you will be fine to qualify for that loan amount, however you still need to speak to a licensed loan officer for them to really analyze everything.

Assets are items like savings and other property that could count toward your ability to keep making the mortgage payments. While loan programs usually don't have specific asset level requirements, being able to show you have a cushion is a point in your favor

Identity and income verification

Lenders need to verify that you are who you say you are, and that you earn what you say you earn. Whether this income is from work earnings or investments, you must show you'll have enough each month to both pay the mortgage and take care of yourself. Some programs simply require proof of income, rather than a minimum level.

Down payment

The higher the down payment you provide, the lower the monthly mortgage payment -- and the lower the interest rate, in some cases. You can find home loans that require zero down, but these have become less common after the 2007-2008 housing crash. Whatever the level, note that if you pay less than a 20 percent down payment, you'll need to have mortgage insurance, the cost of which is usually added on to your monthly mortgage

You need to know all your home loan program options and help you find the best program for your income and credit levels. Get help applying and qualifying for a home loan with Key City Lending.

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