At some point, everyone dreams of being a homeowner. It\u2019s a beautiful goal, but the process of getting there isn\u2019t quite as pretty, especially when it comes to applying for a mortgage. Some lenders can be so picky that it seems impossible to qualify. Fortunately, the process is simplified when you know what lenders want.<\/p>\n
Lenders must be sure that you have a history of making all of your payments before they give you such a large line of credit. They\u2019ll assess your payment history, debt-to-income ratio, and the age of your credit history.<\/p>\n
Related:<\/strong> Real Estate Financing: How to Choose Between Bankers, Mortgage Bankers & Brokers<\/a><\/em><\/p>\n To make sure each of these areas is in great shape, set a goal to make all of your payments as close to on time as possible, pay off as much of your debt as you can before applying, and don\u2019t open a new account about the same time you\u2019re looking to take out a mortgage. Though most of these things look better if you start doing them early, it\u2019s never too late to begin correcting a poor credit history<\/a>.<\/p>\n Lenders check your current balance to be sure you have sufficient funds available for a down payment. If you do not, they will dig deeper into the matter to determine whether or not the money for the down payment is in place.<\/p>\n They also generally ask for the last few months of statements to ensure that you have had the money saved in your account for a couple of months, and it wasn\u2019t magically deposited there right before you asked for the loan. Lenders like to see that you have been saving responsibly for the home.<\/p>\n Lenders need to know that you have stable income, and the best way to verify a steady paycheck is to check your employment history. They\u2019ll look at two years’ worth of tax returns to determine if you can hold a job and make enough money to keep up with your payments.<\/p>\n For self employed or freelance workers, make sure that your business funding is well organized and documented. You\u2019ll likely be required to jump through a few more hoops as well, so if you\u2019re looking for a great reference on getting a mortgage when you\u2019re self-employed, click here<\/a>.<\/p>\n In essence, collateral refers to the assets you must turn over to the lender if you fail to pay your mortgage. The collateral in this case is the home you\u2019re purchasing. The bank will determine the worth of the home, just in case the loan doesn\u2019t work out for both parties. They\u2019ll appraise the house, and if they deem it worth seizing, they will be more liberal with their loan amount. If not, they\u2019ll be hesitant to grant you the amount necessary.<\/p>\n Related:<\/strong> I\u2019m Using Ancillary Income to Cover 63% of My Mortgage: Here\u2019s How<\/a><\/em><\/p>\n2. Current Bank Statements<\/h3>\n
3. Employment Verification<\/h3>\n
4. Collateral<\/h3>\n