Knowing how to qualify for a mortgage is the first step to making your home ownership dreams come true. Nothing is more devastating than looking at a great house that is for sale just to realize you cannot get a loan for it. There are a few measures that you can take to ensure you receive the mortgage you want.
- Compile a list of your income and debts. To qualify for a mortgage, the lender will establish your debt to income ratio. Pay off as many debts as possible before applying for a mortgage. Sometimes the amount you can afford increases once credit cards or loans are paid in full.
- Contact the three major credit bureaus. Request a copy of your credit report and credit score from Experian, TransUnion and Equifax. Verify all the accounts on the report and the payment history for each account. Clear any discrepancies before applying for a mortgage. The three digit credit score will also be used by the lender in determining if you are a risky borrower. The higher the score, the easier it will be to qualify for a mortgage with a great interest rate.
- Save for a large down payment. Many lenders prefer that you have a 20 percent down payment. It may take some time to save that amount of money, but it will be worth the wait. A 20 percent down payment will help you get a lower interest rate and you will not be required to pay PMI or private mortgage insurance. This means significant savings on your monthly house payment.
- Get pre-qualified or pre-approved by a mortgage lender. The main premise behind a pre-qualification is to find out how expensive of a house you can afford. A lender will review your income, debts and assets and give you an estimate of the monthly house payment you can afford and a range of home prices that fit into your budget. The lender is not making a commitment or guarantee that you will get a mortgage in the future or a mortgage for the amount specified during pre-qualification. When you get pre-approved, all of your information is verified and the lender will order a full credit report. The pre-approval is a better guarantee that you qualify for a mortgage in the end, although there are many variables that can change between the time you are pre-approved and the time you officially apply for a mortgage.