Hello World! Welcome Friends! Have you been dreaming about buying a house for a while now and wondering if you will qualify for a home mortgage? Don’t worry, you are not alone. This question keeps many aspiring homeowners away from purchasing their first home. Getting a mortgage for your home is intimidating. After all, it is not a small amount of money. However, if you want to know if you pre-qualify for a home loan, you are at the right place. The following article will discuss the criteria that mortgage lenders consider while giving a loan:
1. Income
If you live in Missouri or nearby and are looking for a trusted St. Louis Mortgage, you can rest assured that many institutions have been providing hassle-free loans to aspiring homeowners for years. However, to ensure that you pre-qualify for the loan, you must consider your household income. Even though there is no minimum amount of income that you need to earn, lenders need to ensure that your household income is enough to cover the mortgage payment and other utility bills.
While calculating your monthly income, the lender will also consider any special allowances, child support, alimony, income from investment accounts, overtime, commissions, and social security payments, along with your regular income, to determine if you qualify for the loan.
2. Credit Score
A mortgage will help you secure your future home; however, you need to ensure that you have a good credit score as well. Your credit score is a testimony of how reliable you are as a borrower. It is a three-digit numerical rating that determines whether you pay your bills on time and are not in too much debt.
Your lender will look at your credit score before giving you a mortgage to understand if you will pay the mortgage payment on time. A credit score of 620 or above is considered to be a good rating and qualifies you for most of the loans. Moreover, if you are an ex-veteran, a credit score of 580 will also make you eligible for the loan.
However, a credit score between 300 and 579 is considered to be very low and doesn’t qualify you for any loan. But don’t worry if you have a low score; there are numerous ways you can improve it. As the initial step, you can begin with paying your bills on time and refrain from taking any other loans. In the interim, consider exploring alternative options like government-backed home loan programs or lenders specializing in home loans with no credit history.
3. Debt to Income Ratio
Your debt-to-income ratio is calculated by dividing your monthly debt, which includes the proposed house mortgage payment, by your gross monthly income. A ratio of 45% qualifies you for almost every conventional home loan. However, there are exceptions to this. If you are an ex-veteran or are applying for a United States Agriculture Department loan or a Federal Housing Administration loan, a DTI score of 41% can also pre-qualify you for the loan.
4. Assets
Before you can avail a loan, your lender will also take into account the assets that you hold. The whole idea behind this is that the lender needs to ensure that in case you fall into a financial crisis, you can convert these assets into cash. Your assets will include your jewelry, stocks, bonds, collectibles, artwork, vehicles, cash accounts, and retirement accounts.
5. The Property Type
Your eligibility for a house mortgage will also depend on the type of property you want to buy. If you are planning to buy a property for a primary residence, the criteria that qualify you for the loan are less rigid. You will need a lower down payment, a low credit score, and a DTI ratio for a primary residence. Moreover, many government-backed loans are only available for primary residence, which makes it easier for you to avail of a mortgage.
Conclusion:
Owning a house of your own no longer has to be a dream. With many trustworthy institutions providing loans to aspiring homeowners, availing a mortgage has become very straightforward. However, before you avail of a loan, make sure to check your debt-to-income ratio and credit score to determine if you meet the minimum requirements.
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