Things to keep in mind when trying to get a mortgage


Buying a home is an excellent way to build equity and increase your long-term financial security. However, many people who could be buyers do not pursue purchasing their own home for one reason – the mortgage.

“I don’t have 20 percent to put down on a home,” “I heard banks won’t lend to you unless you make a certain amount,” or “I have student loans and don’t think I’ll qualify,” are just a few of the most common reasons people list for not purchasing their own home. However, the mortgage lending process is ever-changing and more people than ever before can qualify to get a mortgage at a good rate from a reputable lender. The following are just a few things to keep in mind when trying to get a mortgage.

1. Credit

Your credit score is often one of the most important determining factors of whether or not you will qualify for a mortgage – as well as what kind of interest rate you will be offered. However, even those with bad credit may be able to qualify for a mortgage. While most lenders require a minimum score of 620, they will also look at the history on your credit report. Having accounts that have been open for a year and a history of no late payments can help temper a bad score; likewise, providing a 12-month rental history – with no late payments – is another way to help show lenders you are financially sound.

2. Down payment

Many people hold on to the belief that the only way to purchase a home is if you have 20% of the purchase price available as a down payment. However, FHA loans can often be obtained with as little as 3.5% down, while conventional loans require between 5 and 10% down, depending on the lender. Keep in mind that if you put less than 20% down on a home, you may be required to purchase PMI, or Private Mortgage Insurance.

In addition to the down payment, cash will be required to cover closing costs and other settlement fees. Some lenders provide credit to help buyers cover these fees or other additional costs, such as insurance or taxes for the first year.

3. Income vs. Debts

Even those who are paying off debts, such as student loans, can qualify for a mortgage. Lenders will often look at your debt to income ratio, or DTI; most lenders want to see someone spend less than 50% of their gross monthly income on fixed expenses such as rent, car payments, or student loans. Variable expenses, such as phone bills, cable and internet, or utilities are not included in DTI calculations.

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