Many people are not sure of what steps to take in order to qualify for a mortgage. Either they haven’t gone through the process in a long time, or they may be doing it for the first time. Even if they went to it a few years ago, newer government regulations have brought many changes to the process. Here are some of the steps you’ll need to take in order to qualify for a mortgage in today’s market.
Your Down Payment>
You’ll need to make a down payment in cash in most cases. There are a few exception, such as Veteran Administration loans and Federal Department of Agriculture loans. But most people make a cash down payment. Loans are available to qualified buyers for as little as 3% down. In the past year, the average buyer purchased their home with about 6% down. However, if you put down less than 20%, you will probably need to pay some type of mortgage insurance, which will increase your monthly mortgage payment.
Credit History, Income and Asset Verification>
Your lender will order a credit report. You will need to provide documentation regarding your income. You’ll need to supply copies of tax returns, bank statements, statements of any financial assets such as brokerage statements, pay stubs and more. Give your lender what they ask for, it’s necessary if you want to proceed. If your credit report shows that your credit score does not meet the minimum requirements, you will not qualify for your mortgage. So you may want to find out what your credit score is. If it’s low, take steps to raise your score.
Appraisal>
Your lender will order an independent, third party company to perform an appraisal of the property you wish to purchase. The fees for this appraisal will be added to your closing costs. The appraisal must show the value of the property to be meet or exceed the purchase price on your contract. If it doesn’t appraise for the necessary amount, the mortgage will be denied.