Applying for a home loan is exciting but can also be overwhelming.
Most lenders will ask these questions when applying for a home loan. Here’s how to best prepare.
What’s your Credit Score?
Lenders always ask about your credit first, and you might not know the answer. You won’t be able to qualify if your credit score is in the 400s.
If you haven’t checked your credit lately – get access to your free credit reports here.
This will show your credit history, not the actual score.
If you have a good credit history and you don’t have any recent late payments or adverse credit events, it’s easier to get a loan.
Read: What credit score is needed to buy a house?
How much Money do you Make?
Lenders aren’t asking how much money you think you make or how much extra money you bring in each month.
They want to know how much money you bring in that they can use to qualify you for a loan. Here are the most common income lenders allow:
- Full-time employment income
- Part-time employment income if you’ve had it for two years or longer
- Child support or alimony, if you have proof, it will continue for at least three years
- Social security income or other retirement income if you prove it will continue for at least three years
How much money you make is important, this is what helps lenders determine what you can qualify for.
If you earn $1000 and are looking to purchase a home with a $1000 monthly mortgage payment, that won’t work. You won’t have any money left over for food and other bills.
Do you Have Liquid Assets?
Liquid assets are the funds you’ll use for the down payment and buyer closing costs.
Lenders want to know what your financial situation is like.
If you don’t have money for a down payment, the loan programs that you can qualify for are limited.
You’ll also need enough money to cover the closing costs.
If you don’t have the funds, you’ll need to work with your real estate agent and figure out if you can get a seller credit to cover them or get a gift from a family member.
More info:
- Using a Gift for a Down Payment
- Home Loans with NO Down Payment
- Whats the best loan for a first time home buyer?
How Much Debt do you Have?
Your debt determines if a lender can approve you for a loan.
If you have too much debt outstanding, there may not be room for a mortgage payment.
Lenders want to know about your credit cards, auto loans, student loans, and personal loans.
In addition, any debt reporting on your credit report, they want to know about because they must include it in your debt-to-income ratio.
How Long Have you been at your Job?
Lenders want at least a 2-year job history at the same job. So if you changed jobs recently but stayed in the same industry, it may still count.
Lenders want to avoid someone who job hops and doesn’t keep jobs often.
They won’t approve you for a loan if they don’t think your employment is stable.
Read: Can You Change Jobs While Buying a Home?
Final Thoughts
Preparing yourself with the answers to these questions can ensure you get approved for a loan.
Of course, catching you off guard with such vital questions is not fun.
However, preparing your answers and having the documentation to support your responses can help you move through the loan process much faster.
Are you ready to apply? Start the process by completing the form below.