How to Qualify for a Conventional Mortgage
Many borrowers wonder if they will qualify for a conventional mortgage. With a good down payment of at least 5 percent and a good credit score of more than 720, most borrowers can qualify for a conventional mortgage. There are a few ratios and bits of information a borrower needs to know to help him decide if a lender will pre-approve him for a conventional mortgage. With this knowledge, a borrower can confidently walk into a lender's office knowing that he qualifies for a conventional mortgage.
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Things You'll Need
- Calculator
- 2 months bank statements (all pages)
- 2 months pay stubs
- 2 years tax returns (including W-2 and 1099 forms)
Instructions
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1
Check your credit on a website such as AnnualCreditReport.com. It will be free to access your credit report; however, the score will cost you. You will need to enter your full legal name, social security number, credit card information and date of birth. If your score is above 620, you can qualify for a conventional mortgage with a down payment of 20 percent or more. If your score is 720 or more, you can qualify for a conventional mortgage with as little as a 5 percent down payment.
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Check the credit report for errors and immediately report any through the website. This could raise your score and help you to qualify for the lowest possible rate.
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3
Calculate your debt to income ratio. Add up all of your monthly debts as listed on your credit report and divide that total into your total monthly income before taxes. Now, add your prospective mortgage payment into the debt total and divide it by your monthly income. The number before the new mortgage should be below 40 percent and the number with the new mortgage should be below 50 percent.
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Fill out a mortgage application with your lender, if the information in Steps 1 and 3 suggest that you could qualify for a mortgage. Be sure to bring two months of bank statements (all pages), 2 months of pay stubs and 2 years of tax returns. Additional documentation may apply, depending on your situation.
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Tips & Warnings
Use an online mortgage calculator, such as the one on MortgageCalculator.org, to help you calculate potential mortgage payments. This site allows you to "play" with the numbers to find out what mortgage amount you might want to consider.
With the rapid changes in the mortgage market, you may meet all the criteria in this article and still not qualify for a mortgage. The rules are changing dramatically and it is best to consult a mortgage lender prior to shopping for a new home or refinance, to save time and energy.
