How to Qualify for a House Loan
Owning a home is part of the American dream. Unless you have a large sum of cash to pay for your house in full, you'll need a house loan, usually called a mortgage. Unfortunately, not everyone qualifies for a home loan. Credit, income, job history and collateral are important qualifying factors to receive a house loan.
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Instructions
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Check your credit score. Your credit score is often the main determining factor in getting a home loan. Request your credit report from Equifax, Transunion and Experian (see Resources). Dispute any incorrect or fraudulent activity. Settle any old debts that may be pulling your credit score down. You need a credit score above 600 to qualify for most mortgages. Some lenders may allow you to offset a poor credit score by putting a larger down payment on your house.
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Provide your lender with your personal information. If you and your spouse are purchasing a house together, lenders will request a personal information from you and your spouse. This includes your social security number, job history, income and bank account information. Lenders will assess your current debt and determine if you're able to carry more. To qualify for most home loans, get your debt down to within 28 percent of your total income.
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Put a cash down payment on your house. To qualify for most house loans you need a down payment of 20 percent of the purchase price. There are lenders who will loan you money for your house, but expect to pay higher interest rates. The rule of thumb is, the more money you can put down to purchase your house, the better. This is a great way to immediately increase the equity in your house. Putting more cash down upfront increases your likelihood of qualifying for a mortgage.
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Establish cash reserves. In cases of borderline credit, lenders often ask that you keep cash reserves of $5,000 or more in your bank account. Lenders, typically ask that cash reserves stay in your bank account for two to three months. This ensures lenders that you can fix any damages or problems that may initially occur in your house. Lenders feel that borrowers with a vested interest in their house, are less likely to default on a house loan.
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