Qualifying for a Mortgage   (top)

What amount money can I qualify for?
The total mortgage payment including principal, interest, taxes and insurance as well as any condominium or homeowner association fees divided by your total gross income amount should be 28% or less.

The total mortgage payment, any car payments, credit card and any other loan payments divided by your total gross income, should be lower than 36%.

Applying for a Mortgage
Applying for a Mortgage is both a stressful and exciting time in every prospective home owners life.  How do you make it less stressful?  The advice and tools found in this section of HouseBuyingTips.Com will answer that question.  To put you at ease with the Mortgage process the following table points out what the banks are looking for in your Mortgage application.

What banks look for when approving you for a mortgage:

• Your Credit Report
• Your Credit Score
• Your ability to pay

A potential lender is looking for a few key things while deciding whether or not to approve you for a mortgage.  The most important thing that they will look at is your credit history.   When a bank considers lending you money they want to know if you will be a good risk for them.  The most accurate indicator of this ability is what you've done in the past.  Not only will they look at the specifics of your credit history but they will look very critically at your Credit Score.  Your Credit Score is the method credit bureaus summarize what is on your credit report.

What to do before you apply
The first thing to do before you apply for a mortgage or any loan is get your credit report.  For years the banks would never tell you your credit score.  But no one should know more about your finances than you.  Getting your credit report will allow you to correct any mistakes that appear and possibly get legitimate bad marks removed.  It is very important to clean up your credit as much as possible before applying for a mortgage.  In this chapter we link to the comprehensive credit report which gives you information from all three major credit bureaus.  You should get a "merged" credit report, which is a report from each of the Big Three credit bureaus, before applying for a mortgage because the bank will get your credit report from all three credit bureaus.

DO YOU HAVE THE ABILITY TO PAY?
Since this is the most important question a bank wants to answer while reviewing your application you want to give them as many reasons as possible to say, "Yes."  One of the best things you can do is reduce the amount of all of your debts.  Pay off all of your credit card balances, lay low for a while, and keep as few loans as possible.  A BANK WILL NOT GIVE YOU A MORTGAGE THAT THEY DON'T THINK YOU CAN PAY FOR.   You may have to delay your application by a few months in order to reduce your debt load but it will be worth it in the long run.  In order to avoid delays, you should start this process well in advance of your intended home purchase. 

Aside from following the above steps, you should put the items listed below into an easy to access file.  The potential lender may want to see any or all of these items.  The lender will use these documents that you provide as the evidence of your claim to be a good risk.   You should have all of the items that apply to you in the file you create.   The lender you apply to may not ask to see all of these items but it is better to be prepared.

Sometimes when trying to get a mortgage on a new construction home, the builder will have an affiliation with a certain lender, sometimes more than one.  This lender is usually the one which is handling the construction financing for the builder.  It may be beneficial for you to apply with the recommended lender because sometimes they will give you favorable perks and reviews.  They may pay closing costs or a share of the closing costs or give you a no points loan.  However, it is always a good idea to comparison shop, so you should get a quote from LoanWeb, E-loan or BestRate to make sure that you get the best deal possible.

Always look at the total deal, not some dangling carrots in front of your face.  Compare the entire mortgage cost of several different lenders to determine which type is best for you.