Top 3 Things You Need To Qualify For A Mortgage

Top 3 Things You Need To Qualify For A Mortgage

I often get calls throughout the day with prospective clients asking me if they could qualify for a mortgage.

Here are the 3 main things you need to qualify for a mortgage:

1. Down Payment

You need at least 5% down. That means if you have saved up $5000, it doesn’t matter how good your credit is or how high your salary is. The absolute maximum purchase price you could look at is $100K. Saved up $10K? $200K. Saved up $15K? $300K. That’s not the whole story. You also need to have enough savings to cover closing costs (lawyer fees etc.).

2. Credit

If you don’t use it, you lose it. You need to build credit by using it and paying your bills on time. Most banks insist on a credit score of at least 600. 680 is better. 700+ is ideal. Many people think they have good credit because they’ve never had a loan and they never use credit cards. Wrong. If you don’t use it, you do not appear on their radar so they don’t know if you are capable of paying your bills on time because you have no track record.

3. Income

You need to have stable, guaranteed income or a history of income, usually 2 to 3 years. If

you don’t have a lot of debt, take your income and multiply it by 4. That will give you a rough estimate of how much you can afford. Go back to the example of a $300K home. You would need to have at least $15K for the down payment, meaning that you would need to borrow from the bank about $285K so you would need to be making at least around $285/4 = $71K/year.

That’s it in a nutshell!

Of course we can get creative in different ways like if you don’t make enough but you have a larger down payment or you have rental income. But that’s another story!