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Home Loan Qualification

Prior to accepting an application for a home loan, lenders will qualify you for the mortgage. If you are a first time buyer or have not applied for a home loan in several years, you may be asking exactly what qualification means. Qualification is the process lenders use to decide whether, and how much, to lend to an applicant. You can improve your chances of qualifying for the home loan you need by learning as much as possible about the process.

EMPLOYMENT AND INCOME

The lender uses several measures to determine your ability to repay the home loan you are requesting. First, they will want to know that your employment history is stable. A minimum of two years with the same employer is commonly desired. If not, how long did you work for your previous employer? What if you have had a recent change in employment? Can you demonstrate your reasons were responsible and that the employment is stable? The lender will verify your information with your employer. The lender will look for evidence that you are responsible and have resources to repay the loan.

The lender will require a full disclosure of your income and financial responsibilities. By comparing what you earn against what you owe, the lender will be able to evaluate your ability to meet your home loan payments.

CREDIT WORTHINESS

Before approving you, the lender will evaluate your credit report to determine the likeliness that you will make regular, timely mortgage payments. Most importantly, lenders look for a history of consistent payments made on time. They also check that you use credit responsibly, without regularly approaching the maximum levels available.

STEPS YOU CAN TAKE BEFORE YOU APPLY

The decision to buy a home is one that takes some time. Try to maintain your time in job for a minimum of two years before applying for home loan qualification. Know what is in your credit reports from the three major credit bureaus. If any information is incorrect, write to the affected credit bureau to request correction or removal of errors. Also, because your debt to income ratio is directly related to your ability to qualify for a home loan, pay down as much debt as possible prior to making application. The more of these steps you take, the greater will be your chances of qualifying for all the money required for your home loan.