If you don’t know what it takes to qualify for a mortgage, you’re not alone. This lack of knowledge prevents people from even trying to purchase their first home. Is this you? If so, understanding the whole process better will clear up a lot of confusion. Read on to find out how to qualify for a mortgage and which type of loan is best for you.

Down Payment Requirements

Are you wondering how much of a down payment you need to qualify for a mortgage? Most people are. In spite of all the mortgage information available online, a lot of it is insufficient. So many still overestimate the down payment needed to qualify for a mortgage. The answer used to be 20 percent. But nowadays you can qualify for a home loan with a low down payment. Some types of mortgages even require no down payment! And no, this isn’t some special offer for first-time home buyers only.

Here are some down payment guidelines for different types of home loans:

• VA loans and USDA loans require no down payment
• FHA loans are one of the most popular types of home loans. They require 3.5 percent down with a 580 credit score. If your credit score ranks 500-579, your FHA loan will require 10 percent down
• 203k loans also require 3.5 percent down
• A Conventional 97 loan requires only 3 percent down
• Conventional loans require anywhere between 5 percent and 20 percent down.
  
  

Credit Score Requirements

How’s your credit score? Do you know the credit score you need to qualify for a mortgage? Again, most people don’t. And many can’t recall what their current credit score is even after checking it recently. Your credit score is one of the biggest factors in determining whether or not you qualify for a mortgage. And of course, an excellent credit score gives you lots of worry-free wiggle room in qualifying for a home loan.

A credit score of 680 or higher is ideal when you’re in need of getting approved for a home loan. Some lenders require a credit score of 640 while others will accept lower credit scores.

Each of the loan programs listed above have a set minimum qualifying credit score requirements.

• VA loans and USDA loans require a credit score of 620. For VA loans, some lenders may  be able to approve a credit score of 580+
• FHA loans require a 580 credit score
• 203k and Conventional loans require a credit score of 640
• Conventional 97 loans require a 620 credit score

But what if you have bad credit? If you need to improve your credit score to qualify for a mortgage, click here. Learn how to improve your credit score by 100 points in 30 days.

Mortgage Document Requirements

In order for your lender to process your loan, you must produce several documents. So be prepared ahead of time and get the following ready now:

• W2’s from the past 2 years. You should have at least 2 years of income from the same company or industry documented
• Pay-stubs for the last 3 months
• Bank statements for the past 3 months
• Tax returns for the previous 2 years
• A list of your debts and assets
• Divorce decree if you have gone through a divorce
• Additional income documentation
  
  

Basic Guidelines for How to Qualify for a Mortgage

If you want to qualify for a home loan, follow these basic guidelines:

• Prove your income is sufficient and consistent
• Have at least 2 years of documented income from the same company or in the same industry
• If you earn commissions, average your income from the last 2 years of tax returns

What income is considered “qualifying income”?

• W-2 income/salary income from part-time jobs
• Income from a second job
• Overtime and bonuses
• Seasonal jobs
• Self-employed income
• Alimony and child support (Documentation for this is required)
• Non-qualifying VA income
• Income from the lottery gambling
• Unemployment pay
• Single bonuses non-occupying co-signer income
• Unverifiable income
• Income from Rental Properties
  
  

Homeownership is a Possibility!

So if you are one of the 20 percent of consumers who believe a down payment of 10 percent or less is not enough to purchase a home, think again! There are mortgage financing options available that don’t require a 20 percent down payment. Providing you are a creditworthy prospective buyer, lenders now offer safe, sustainable loans with as little as 3 percent down. Obtaining a mortgage isn’t as difficult as it used to be. Homeownership is truly a possibility!

Contact Charles D’Alessandro, your Brooklyn Real Estate Agent with Fillmore Real Estate. Call (718) 253-9600 ext.206 or email [email protected]. With 30-plus years of real estate experience in Brooklyn, he can answer your questions about how to qualify for a mortgage.

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Charles D’Alessandro
Your Brooklyn Real Estate Agent
718-253-9600 ext. 206
[email protected]