Home Loans 101: What You Need to Qualify for a Mortgage Today

Written By:

2014-quizzle-blog-home-loan3

2014-quizzle-blog-home-loan3

Most people know about the many benefits and rewards of becoming a homeowner. What most don’t know is what it takes to qualify to buy a house.

Now more than ever, there is a lot of confusion about getting qualified for a mortgage – and a lot of misinformation as well. It’s common to hear people say, “I heard banks aren’t lending money right now,” or, “I heard you need to have 20 percent down to get a mortgage these days.”

As a mortgage banker, I hear these things a lot. So today, I’m dispelling the myths and offering the basic information you need to know about qualifying for a mortgage.  This information is important whether you are a first-time home buyer or current homeowner who hasn’t gotten a home loan in several years.

While mortgage underwriters look at a lot of different information to determine whether you’ll qualify for a mortgage, ultimately, it comes down to four things: credit, equity, income and assets.

Credit

Your credit is one of the most important things that will be considered when determining if you qualify for a home loan. It’s also one of the things that most people don’t know a lot about. Your credit history is how a lender will judge the likelihood that you’ll pay them back the money they lend you. To do this, a lender will look at the length of your credit history, how reliably you’ve paid on your loan accounts and if you’re maxed out on credit cards or loans. These are also the factors that determine your credit rating or credit score. Your credit score will be used to qualify you for a mortgage and will often determine the interest rate you will be offered.

2014-quizzle-checkcredit-banner

Credit scores used for a mortgage range between 350 (low) and 850 (high). A healthy credit score is generally considered to be above 740 and a poor credit score is anything below 600. The higher your credit score, the better the interest rate you’ll likely be offered. For most lenders, the minimum score to qualify for a home loan is 620.

In addition to your credit score, lenders will look at items on your credit report. They’ll want to see that you’ve had accounts open for at least a year and that you don’t have any large outstanding collections or judgments against you. If you have collections or judgments on your credit report, you will usually have to take care of those first before you can get financing (the one exception to this is usually medical bills).  The other thing that won’t show up on your credit report, but is verified, is your rental history. Lenders want to see if you’ve had any late rent or mortgage payments in the past 12 months. Any more than one late payment and you’ll have a tough time getting approved.

Equity / Down Payment

Buying a Home

The minimum required down payment when buying a primary home is typically 3.5 percent of the sales price, which will allow you to get an FHA loan - a great option for first-time home buyers or anyone who can’t come up with a huge down payment. FHA loans also don’t penalize you with a higher interest rate if you have less-than-perfect credit. Another option is a conventional mortgage. Conventional loans typically require 5 percent to 10 percent down depending on the lender.

When buying a home, keep in mind that you will not only need to have funds for the down payment, but you will also need additional cash for various settlement fees. These can range quite a bit depending on the type of the loan and the area where you are buying; talk to a trusted lender to learn more. The good news is that home loan programs allow you get a credit from the home seller to help pay for these settlement fees, as well as additional costs, like your first year’s taxes and insurance.

Refinancing a Home

The biggest obstacle for many homeowners right now is the equity – or lack thereof – in their homes. The housing market has taken a historic plunge and many people find themselves with much less equity in their homes than they did a few years ago. Many people also find themselves “underwater” in their homes, actually owing more on the mortgage than what the house is worth. Generally, you can only finance up to 95 percent to 98 percent of the appraised value of your home. If an appraisal on your home comes in low, you may be required to come up with additional funds to close on your loan, or not get a loan at all. If the appraisal comes in so low that you’re underwater, you still have a few options. For specifics, talk to your mortgage lender.

Income vs. Debts

Another factor looked at by lenders is your debt-to-income ratio (DTI). This is simply your fixed expenses with the new mortgage compared to your gross monthly income (income before taxes are taken out). Lenders typically want to see someone spending less than 50 percent of their gross monthly income on these fixed expenses, which include your mortgage payment, property taxes, association dues, home owners insurance, car loans, student loans, credit cards and any other fixed payments that would show up on your credit report. Variable expenses like utilities, phone and cable are not included in your DTI.

Lenders also want to see a good employment history and will verify your past two years of work. It’s much more difficult to qualify for a mortgage if you don’t work a typical “nine to five” job, are part-time or self-employed. For these scenarios, you will need to have been at your job for the past two years and your income will usually be averaged. If you are self-employed, expect to fork over your tax returns, as “stated income loans” are a thing of the past.  If you have a lot of different tax write-offs to minimize what you pay Uncle Sam, you may not be able to prove enough income to qualify.

Assets

Lenders also verify that the funds you will use for your down payment are in a liquid account, like a checking account or savings account. If you like to keep your cash in a pile under your mattress, you may have trouble getting approved for a loan and will need to deposit that cash into a bank account. Lenders need to see where all the funds being used in the transaction are coming from and there is no way to document loose cash.

Sometimes, in addition to the funds you will use for the down payment, there is an additional requirement that you have cash reserves. This varies from lender to lender, and will depend on the type of financing you are trying to get. Reserve requirements are more common if you’re buying an investment property or second home, rather than a primary residence. In most scenarios, the requirement will be two to six months worth of mortgage payments in liquid reserves.

In sum, there are many different factors that go into qualifying for a home loan today. Hopefully, this breakdown will help you figure out where you stand and whether now is a good time to apply for a new home loan. When it comes to obtaining any home financing, make sure you talk to a good mortgage lender who will walk you through all of the specifics.

Eric Ehrhardt is a home loan expert with Quicken Loans, America’s #1 Online Mortgage Lender. He has more than 6 years experience in the mortgage industry and prides himself on educating his clients on which loan options make the most sense for their situations.

Related articles:


  • http://destination313 SLP

    Eric this is a very informative article that helps explain how to qualify for a mortgage

  • http://Quizzle Miseka

    I have a long way to go befor I can buy my house. I thought you can get aloan from a lender and call it a day. Wow! took me a few steps back

  • Santosh seo

    Thank you for sharing valuable information. Nice post. I enjoyed reading this post. The whole blog is very nice found some good stuff and good information here Thanks..Also visit my page Hard Money Mortgage Lenders Florida.

  • Sherry Canon

    Equity or Down Payment is what to look into the most when it comes to commercial mortgages . This is because higher the down payment lesser is the burden of debt. Thanks for the article !

  • paul

    Good Day

    Do you need a loan?

    We give at loan with 2%.

    if yes you can contact us: accessloan7@hotmail.com

  • david zeck

    This is an informative blog by which I have got that
    info which I really wanted to get.
    homes
    for sale in northern va

  • becky

    Hello, i am Mrs Becky Ovia, a private loan lender who gives life time opportunity loans. Do you need an urgent loan to clear your debts or you need a capital loan to improve your business? have you been rejected by banks and other financial agencies? Do you need a consolidation loan or a mortgage? search no more as we are here to make all your financial problems a thing of the past. We loan funds out to individuals in need of financial assistance, that have a bad credit or in need of money to pay bills,to invest on business at a rate of 2%. I want to use this medium to inform you that we render reliable and beneficiary assistance and will be willing to offer you a loan. So contact us today via email at: (beckyovia99@live.co.uk)

  • john cliton

    Good Day I am John cliton from United state of America, i stayed in Alabama, and i have a broke up business, until i found this company email who help me to gain a loan for business, and now i want to used this short medium to congratulate the company for the fast and safe money they loan to me without any form of collateral, i loan 98,000.00USD form the company to save my business and lots more, i saw their mail on the internet, everyone always give testimony for what they did, so i quickly contacted them and they all did everything for me without stress and my money was sent to my account 24hrs later, i was surprise and feel glad, now i now have a standard business control agent who help me, now i will advice those who need urgent loan to contact them at oscarloanfinance@hotmail.com he is a very Good man and I know that he will help you immediately.

  • Johnny Elvis

    A MUST READ:

    Good day everyone, I am Mr Johnny Elvis by name, i am a citizen of new york USA, i have been looking forward for a genuine loan company for the past 2 months and all i got was group of scams who made me to trust them and at the end of the day, they duped me of $7000 without giving anything in return, all my hope was lost, i got confused and frustrated,i find it very difficult to feed my family, i never wanted to have anything to do with loan companies on net again, because i never trusted any loan company again since i was scammed, so i went to borrow some money from a friend, i told him all that happened and he said he can help me, that he knows a loan company that can help me, that he just got a loan from them, he directed me on how to apply for the loan, i did as he told me, i applied, though i never believed but i tried and to my greatest surprise my loan was granted to me within 24 hours, i could not believe, i am happy and rich again and i am thanking God that upon this scams all over the places a genuine company like this still exist, please i advise everyone out there who are in need of loan and can be reliable, trusted and capable of paying back at the due time of funds to contact (eladioloancompany@yahoo.com ) or (eladioloancompany@gmail.com) and be free from scams on the internet. they will never disappoint you.

  • Johnny Elvis

    Eladio loan company is a tested and trusted loan company who gives all kinds of loan at a very quick and affordable rate. email them today at: eladioloancompany@yahoo.com for your loan and be free from scams on the internet.

  • Johnny Elvis

    A MUST READ:

    Good day everyone, I am Mr Johnny Elvis by name, i am a citizen of new york USA, i have been looking forward for a genuine loan company for the past 2 months and all i got was group of scams who made me to trust them and at the end of the day, they duped me of $7000 without giving anything in return, all my hope was lost, i got confused and frustrated,i find it very difficult to feed my family, i never wanted to have anything to do with loan companies on net again, because i never trusted any loan company again since i was scammed, so i went to borrow some money from a friend, i told him all that happened and he said he can help me, that he knows a loan company that can help me, that he just got a loan from them, he directed me on how to apply for the loan, i did as he told me, i applied, though i never believed but i tried and to my greatest surprise my loan was granted to me within 24 hours, i could not believe, i am happy and rich again and i am thanking God that upon this scams all over the places a genuine company like this still exist, please i advise everyone out there who are in need of loan and can be reliable, trusted and capable of paying back at the due time of funds to contact (eladioloancompany@yahoo.com ) or (eladioloancompany@gmail.com) and be free from scams on the internet. they will never disappoint you.

  • Larry ben

    Hello everybody, I am Mrs Abygirl,currently living in
    canada,I am a married man at the moment with two kids and i was stuck in
    a financial situation by august 2012 and i needed to refinance and pay
    my bills for my son medication. I tried seeking loans
    from various loan firms both private and corporate but never with
    success,and most banks declined my credit. But as God would have it, i
    was introduced to a Man of God a private loan lender by a friend named
    Mr. James and i got a loan sum of $700,000USD and
    today am a business owner and my kids are doing well at the moment. So
    dear,if you must contact any firm with reference to securing a loan with
    low interest rate of 2% and better repayment plans and schedule,please
    contact Mr. Johnson peter he doesn’t know
    that am doing this but am so happy now and i decided to let people know
    more about her,he offers all kinds of loans to both individuals and
    company and also i want God to bless him more. You can contact his
    company through this email oceanicloanfirm000@hotmail.com

  • Goh Cheng

    Dear Loan Seekers,

    We are Cheng Loans Finance! We offer loans to Individual & Companies in need of financial assistance (Loan) at 2% interest rate for the duration of 1 to 25 years. Do you need a loan without stress or delay? Have you been turn down by your local banks? We offer International & Local Loans to interested clients for the amount of $5,000 USD to $100,000,000 USD OR (EUR, GBP, KWD, SGD, MYR), apply with us and get your loan approved without stress: Interested person should contact us via E-mails: {chengloansfinance@yahoo.com.sg} OR {gohcheng444@gmail.com}

  • Daniel Martinez

    Credit Exchange Home, Is a sincere Loan company approved by the Government and a certified and authorized company, they give out international and local loans to all countries in the world, Amount given out as loan is a minimum of $2,000 to a maximum of $2,500,000 Dollars, Euro and Pounds.

    We offer loans with a dependable guarantee to all our clients all over the Globe. Our loan interest rates are very low and affordable with a negotiable duration.

    Available Loans

    Business loan

    Home loan

    Personal loan

    Car loan

    Student loan,

    Dept Consolidation

    Loan for Business Expansion or Loans for any legitimate reason.

    Apply for a loan today with your loan amount and duration. It’s Easy and fast to get. 3% interest rates and monthly installment payments.

    For further enquires and how to apply for a loan with Credit Exchange Home, please feel free to contact our application desk via this email: [homeofloanshelp@gmail.com]

    e-mail us for more info: homeofloanshelp@gmail.com

    Hope to hear from you soon.

    Thanks for your time and understanding, CUSTOMER’S SATISFACTION IS OUR PRIDE.

    Yours Faithfully,

    Mr. Daniel Martinez

  • Daniel Martinez

    Dear Sir/Madam,

    I am Mr Daniel Martinez a certified loan lender at 3% Interest Rate. Are you looking for urgent loan to finance your project and pay off your bills, Here comes your opportunity to apply at Credit Exchange Home, We offer all types of loans, Interested person must be honest and serious with us. contact us via email: homeofloanshelp@gmail.com

    e-mail us for more info: homeofloanshelp@gmail.com

    Hope to hear from you soon.

    Thanks for your time and understanding, CUSTOMER’S SATISFACTION IS OUR PRIDE.

    Yours Faithfully,

    Mr. Daniel Martinez

  • Mr Randy lee

    Hi everyone i live in Texas USA I applied for a loan of $100,000 in march 2012 with diamond loan company and i was ask to pay $1000 for insurance which i did and they never transfer my loan and i was charge more and more fee which i got nothing in return i lost over $5000 to them because i was anxious of the loan i have to apply through another company and this second company did the worst to me,i was ask to pay only $100 for transfer fee which i later give them the total of $7000 and till date i never get mails from them.and this really make me frustrated Until 1st of July when a friend of my refer me to Fidelity Loan company at first i was scared but i later contact them and after three days they transfer to me $120,000.00usd on 2% interest please if any one is looking for a loan then fidelity (randy_loanoffer112@hotmail.com) loan company is the solution to your loan problem’s.thank you again Mr Wang Yang C.E.O randy_loanoffer112@hotmail.com any one in need of loan can reach them now on this email randy_loanoffer112@hotmail.com

  • Brian Harry

    Welcome to HOLY APOSTLES CATHOLIC CHURCH LOAN FIRM we give out loan of all kinds, If you are in need of urgent loan kindly contact us now with 2% interest rate and instant approval.Email:holyapostlescatholicchurchloan@gmail.com

    THANKS,

    REV.FR. VINCENT HARRY

  • bobmaxswel

    Good Day.

    Are you looking for a business loan,personal loan,home loan, etc..OR Were
    you refused a loan by a bank or any financial institution for one or more
    reasons.You are in the right place for your loan solutions!I am a
    private lender,I grant loans to companies and
    individuals at a low and affordable interest rate of 3%. Interested?
    Contact us for the
    follow up processing of the loan and transfer within 48 hours;

    APPLICATION DETAILS
    Name
    Date of birth :
    Gender:
    Marital status:
    Address:
    City:
    Country:
    Phone:
    Loan Amount:
    Loan Duration :
    Net monthly income.
    contact email, cimaloan@yahoo.com

  • Jackie Luna

    Good day friends I did not believe any more in the loan of money because all the banks rejected my file; . But one day a friend advised me a particular lender of which it gave me the lewisharry_lending@hotmail.com e-mail. I tried the blow with him while addressing an e-mail to him then that walked. I had the good person an honest particular lender whom I sought since of the years. I secured my loan which currently allows me of good food and I pay my monthly payments regularly. You can contact it if you are in the need for a loan for various personal reasons. Two of my colleagues also received loans without any difficulty. Here its E-mail: lewisharry_lending@hotmail.com

  • ankita9030

    I absolutely enjoyed your blog post to the point as it offers really pleasant and precious information.

  • Goh Cheng

    Dear Loan Seekers,

    We are Cheng Loans Finance! We offer loans to Individual & Companies in need of financial assistance (Loan) at 2% interest rate for the duration of 1 to 25 years. Do you need a loan without stress or delay? Have you been turn down by your local banks? We offer International & Local Loans to interested clients for the amount of $5,000 USD to $100,000,000 USD OR (EUR, GBP, KWD, SGD, MYR), apply with us and get your loan approved without stress: Interested person should contact us via E-mails: {chengloansfinance@yahoo.com.sg} OR {gohcheng444@gmail.com}

  • hi

    Very good content.

    There is also another point of view by looking what your banks want when you apply for loan.

    http://loanstreet.com.my/learning-centre/5-things-banks-look-for-when-applying-home-loan

  • Christ

    Good Day To Everybody In this site i want to testify how i was rescue by Mr Razaq Azeez When i was Rip off last month I’m Mr Christ by name. i want to use this medium to alert all loan seekers to be very careful because there are scams everywhere.Few weeks ago I was financially strained, and due to my desperation I was scammed by several online lenders. I had almost lost hope until a friend of mine referred me to a very reliable lender called Mr Mr Razaq Azeez who lend me a loan of $50,000 under 4hours without any stress. If you are in need of any kind of loan just contact him via email.. (razaqazeezloanfirm@outlook.com) i am using this medium to alert all loan seekers because of the hell I passed through in the hands of those fraudulent lenders. And I don’t wish even my enemy to pass through such hell that I passed through in the hands of those fraudulent online lenders,i will also want you to help me pass this information to others who are also in need of a loan once you have also receive your loan from Mr Mr Razaq Azeez,i pray that God should give him long life. God bless him forever for the good things he has done in my life.

  • countney

    Good Day I am Mrs (cournty smith) from United state of America, i stayed in Alabama, and i have a broke up business, until i found this company email who help me to gain a loan for business,, and now i want to used this short medium to congratulate the above company for the fast and safe money they loan to me without any form of collateral, i loan 500,000USD from the company to save my business and lots more, i saw their mail on the internet, everyone always give testimony for what they did, so i quickly contacted them and they all did everything for me without stress and my money was sent to my account 24hrs later, i was surprise and feel glad, now i now have a standard business control agent who help me, now i will advice those who need urgent loan to contact her at lissaperryloancompany@gmail.com he is a very God man and I know that he will help you immediately.. Below is he loan encouraging words. For loan lenders Are you financially down and need loan? Do you need loan to pay off credits and debts? Do you need finance to set up your own business? Do you need loans to carry out large projects? Do you need college loan? Do you need funding for various other processes? email contact:lissaperryloancompany@gmail.com

  • david

    FINANCE ASSIST LTD.

    We
    offer
    private, commercial and personal loans with very low annual interest
    rates as low as 3% per year to 50 years repayment anywhere in the world.
    We offer loans ranging from $ 5,000 U.S. $ 100 million. Our loans are
    well insured for maximum security is our priority. Are you losing sleep
    at night worrying how to get a legitimate loan lender?

    Contact
    david smith (Loan Services) now with experts who can help you get Loans
    stop bad credit history find solutions that will win

    Please contact us for more information about davidsmithloanfirm@yahoo.com

    Creditor: Mr. david smith
    Creditor E-mail:
    davidsmithloanfirm@ yahoo.com

    Sincerely,
    Mr. david smith.
    GENERAL CONSULTANT.