Mortgage 101: Qualifying For A Mortgage

by Emily RicheyMarch 28, 2016

If you’re a first-time homebuyer, then the prospect of qualifying for a mortgage may be a bit intimidating, but there’s no need to worry. Let us give you the rundown on everything you need to know about qualifying for a home loan, along with a few tips so you can be better prepared.
Asking Questions

  1. Have Your Records in Order
  2. Your Credit Rating Matters
  3. If You Find Errors, Dispute Them
  4. Pay Down Your Debts
  5. Boost Your Income
  6. Avoid Applying for New Credit
  7. Save for a Down Payment

The Lender Will Ask a Lot of Questions

Yes, you may feel like you’re being interrogated, but the lender is just trying to gather as much information about your overall financial situation as possible. They are not trying to put you on the defensive; they are trying to figure out what the best possible mortgage product is for you.

Have Your Records in Order

Your mortgage application process will go much more smoothly if you have all of the necessary financial records gathered and organized before you go to visit a loan office. Be prepared to show proof of income with the last two years’ W2 forms and tax returns, statements for any interest or dividend income you’ve received, and documentation showing other forms of income, such as child support or alimony. You should also be able to show documentation proving the value of personal assets such as vehicles, life insurance policies, and investment accounts. Finally, you’ll need to gather account numbers and statements cataloguing your current debts.

Your Credit Rating Matters

You’re undoubtedly aware that your credit rating is a key metric that your mortgage lender will use when evaluating your loan application. You don’t need perfect credit to qualify for a mortgage, but the higher your credit score, the better off you’ll be. Certain derogatory credit entries might be outside your scope of influence, but you may be able to address others. Don’t have great credit? Make sure to read our guide to buying a house with bad credit.
Women making phone call to credit company

If You Find Errors, Dispute Them

Go over your credit report with a fine-toothed comb, looking for reporting errors that may be negatively impacting your ability to qualify for a mortgage. If you find any, dispute them as far in advance of when you plan to purchase the home as possible.

Pay Down Your Debts

If you have accounts that are delinquent or have high balances, do your best to pay them off, or at least reduce your outstanding debts as much as you can. Ideally, you’ll be able to bring credit card balances down to 30% of the available balance or less, but even 60% looks much better to a lender than a maxed out credit limit.
qualifying for a home mortgage

Boost Your Income

Easier said than done? Perhaps. But if you look hard enough, you may find ways to earn a bit more money before applying for a mortgage. If you’re overdue for a raise at work then make your case to your employer. If getting a pay bump isn’t a possibility, then consider running a side business in your spare time. Either way, you’ll be lowering your debt-to-income ratio, which will improve your chances of getting approved for a mortgage with desirable terms.

Avoid Applying for New Credit

When you apply for credit, whether it is a new credit card, an auto loan, or a line of credit on your checking account, the lender will pull your credit report. Too many credit inquiries can make you look desperate for capital and hurt your credit score. If at all possible, avoid applying for new credit when you’re planning on purchasing a home.
Saving money!

Save for a Down Payment

Buyers who can afford to save up for a down payment enjoy several key advantages. They have more leverage with lenders, and may be able to negotiate for better terms. They also have a competitive advantage over other buyers, and if they’re able to put down at least 20% they can avoid the additional cost of mortgage insurance.

Cash poor? There are mortgage options available to those who can’t afford a substantial down payment. Some mortgages, such as those offered by the VA and USDA, even allow buyers to purchase a home with no money down. FHA loans only require 3%. But just because it is possible to purchase a home with a very small or nonexistent down payment, doesn’t mean that it is necessarily the most prudent choice. The bottom line is this: you don’t need 20%, but the more you can offer as a down payment, the better off you’ll be.

Happy House Hunting!

The home buying process can be daunting, but it’s also a very exciting time. We hope this guide has broken down the steps and subsequently taken some of the intimidation factor out of applying for a mortgage. is the place to dream and discover your ideal home! Are you starting to get the itch to look for your first or next home, but don’t know where to start? You’ve come to the right place! Browse our real estate and lifestyle blog for home buying tips, mortgage guides, DIY ideas, interior design, lifestyle topics, general home inspiration, or just some homes fun. We are sure you can scratch that itch and find all the information and tools you need to help in your home search. Want to start looking at available real estate right now? Head to our home page and check out homes for sale or rent listings all over the country.
Happy house hunting!

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About The Author
Emily Richey
Emily is a Content Marketing Assistant and a new home owner! When not coordinating content for Homes, she stays busy cooking in her new kitchen, reading interior design magazines, running with her pup and husband, exploring new places, and entertaining.