It is common for many people to think that buying a house is as easy as getting a mortgage. While finding a lender and obtaining a loan is essential, qualifying for a mortgage is not a straightforward process. As this involves borrowing money to afford a major purchase, the lenders or the banks will want to know if you can pay it back.
Mortgage Qualifications Vary
Loan qualifications, of course, depend on each lender. Not all mortgage companies offer the same loan, so others may approve your application, while some may reject it. This is why it is important to shop around and compare loan products from different lenders. Mortgage companies in Phoenix note that doing so will help you determine who offers the lowest rates with the best terms.
Pre-Qualification and Pre-Approval
A mortgage pre-qualification is an important step in getting a loan. This will help you find out how much is the house you can afford depending on your credit score, income, and assets. It is also beneficial to know your debt-to-income ratio to know the amount of loan you can qualify for. If the numbers are good, the lender may also give your application a pre-approval.
Qualifying for a mortgage involves checking your credit score and knowing if you have enough income to make the monthly payments. An ideal score of 720, along with a strong credit history, is a good sign for all lenders. If your score is below 620, you may find it hard to qualify for a mortgage. Some may offer you a loan, but this comes with high interest rates.
Job history is also essential, as you need to show that you have a steady source of income (for at least two years or longer). If you just had your first job for a few months, qualifying for a mortgage may not be possible, unless you have a well-paying job that correlates with your college degree. Mortgage lenders will not feel at ease lending you if you change jobs every few months.
Apart from these things, you also need to consider down payment needed. This will depend on the type of loan you are applying for. The ideal payment is 20% of the purchase, but can still qualify with a lower amount. Be sure to learn more about mortgage application and find a reliable lender who will help you along the way.