How do I qualify for a mortgage?
Qualifying for a mortgage preapproval is the first step to qualifying for a mortgage. The preapproval is a preliminary qualification that identifies your purchasing power based on your financial situation. In order to formally qualify for a mortgage and make it to the closing table, we will take a deep dive into three primary areas of your finances:
- Credit Score: Your credit score gives us a sense of how well you pay back your debts and how consistent you are with your debt payments. Whether it’s credit card debt or student loans, your ability to pay back is a huge influence on your credit score:
- Debt-to-Income (DTI) Ratio: Your income is a major factor we will consider when determining your ability to qualify for a mortgage and for how much of a mortgage you might qualify for. Comparing your debt to your income shows us how much you can afford to buy given your unique circumstances.
- Essential Documentation: In order to give your mortgage lender and loan officer more confidence in your ability to repay a loan, you will need to supply critical documentation that verifies your current financial situation.
The main factor in deciding whether you will get approved is your credit score. It’s good to note that although there are set minimum qualifying credit score requirements for each specific loan program, some lenders are able to fulfill loans outside of those credit score requirements.
When it comes to your income, you want to make sure you can prove that it’s consistent and sufficient to qualify for a mortgage. For salary workers this is easy, but if you have a job that is commission based or you are self-employed it will be more complex. This leads us straight into the documentation required.
Documents Required to Qualify for a Mortgage
To qualify for a mortgage, you need to provide the proper required documents, this includes but is not limited to:
- Paystubs for 3 months
- Previous two years of tax returns
- Compiled list of assets and debts
- W2’s from the past 2 years
- Bank statements from the past three months
- Divorce decree (if applicable)
- Any other additional income documentation to qualify for a mortgage.