Qualifying for a Loan

What Do I Need to Qualify for a Home Loan?

As you plan to buy a new house, you likely have several questions about the mortgage qualification process. Getting this major step out of the way upfront will speed up the process significantly and ensure that you can relax a bit and focus on finding the perfect home of your dreams.

ERA Fernandina Beach Realty has provided you with some helpful answers to some of the most common questions regarding mortgages to help you get started. Of course, every situation is very unique, and after meeting with your lender you will get more details about any particular steps you may need to take care of in order to qualify.

Qualifying for a Loan - What do I Need to Qualify? What if I have Bad Credit?

What do I need to qualify for a home loan?

There are several requirements for a mortgage, including a lot more paperwork than what used to be necessary. What you will provide will depend on whether you are self-employed or an employee as well as other factors. In general, you will want to be able to prove that you have stable employment, ideally for 2 years or longer. You will need to provide tax returns, bank statements, your W-2 forms, recent pay stubs, and your credit report which is usually hard pulled once you are serious about a particular lender.

Can I get a home loan if I have bad credit?

Yes, you can still qualify for a home loan with bad credit. These are called “subprime” mortgages and they will often come with high fees and interest rates, so that should be expected. You can choose to apply at different lenders with your current credit to see what options you may have. Most will not require a hard pull of your credit to determine your eligibility. Or it may be in your best interest to pay down some of your debt and work on removing negative items from your credit report in order to improve your score.

What kind of credit score do you need to buy a house?

Although you will find some variation in this answer depending on which lender you ask, many recommend that your FICO credit score should be 680 or higher for the best interest rates and loan options. Some lenders will be able to accept lower scores such as 640 and even lower, but you may not get the most flexible options when it comes to interest rates and loan choices.

How much do I need to make to qualify for a mortgage?

The answer to this question depends on the price range of the home you are looking to buy. There are a variety of online calculators that can help you determine the amount of home you can afford based on your monthly gross income, with the monthly payments for your debts also taken into account. Your debt to income ratio is a major metric that will be used to determine how much of a mortgage you can qualify for. When your current debts and mortgage payment are combined, it’s recommended that they should not exceed 36% of your gross monthly income.

How long do you have to be on the job to qualify for a mortgage?

As a recommendation, you should have at least 2 years of verifiable employment before applying for a mortgage, in order to be eligible for a conventional or FHA loan. Lenders want to see a predictable and stable employment track record, and 2 years is the minimum they typically require. This does not mean that you have to have the same job for 2 years, however, if you have had different jobs you will simply need to provide income documentation.

We hope this information has proven to be helpful as you go about your home search. Amelia Island has become one of the top vacation home purchase destinations in the United States.

With beautiful beaches, pleasant year-round weather, amazing golf courses, fishing and boating opportunities and so much more, our island might be the ideal spot for your next home purchase. Contact us today with any questions you may have about qualifying for a mortgage or buying a home here.