All in all it's a pretty simple process consisting of these two steps: completing a loan application, then giving the lender a verification of your income, as well as proof of your assets and debts. Then, it's all in the lender's hands. Your debt-to-income ratios, and your employment and credit history will be reviewed. Once the lender is satisfied, you will finally get approved for a mortgage depending only on the property appraisal and the title report. Sounds straightforward enough, isn't it? Then why do so many homebuyers complain about the difficulties qualifying for a mortgage? The answer is just as straightforward, documentation.
So start by making sure all the documents you need are in order and that you filled in your application form is filled correctly and completely. This way you will avoid unnecessary delays and you will make a good impression on your lender.
It's very important to prove that you are indeed capable of paying your loans. If your employment record isn't in good shape, then you will be treated as a high-risk client and you will have to pay higher rates.
If you've been in the same place of work for at least two consecutive years, then it will be a solid guarantee that you can earn a steady income and thus make good on your monthly payments.
Another factor is your actual income as it will influence the amount of money you can borrow.
If you recently changed jobs and the field you're now in is apparently unrelated, then you should write a letter of explanation to the lender. In it, you should explain how this new job fits in your career plans. Also, explain any breaks you might have on employment. An inconsistent career need not put a stopper on your home-buying plans. Lenders today work with clients on an individual level and they are prepared to accommodate almost any situation.
If you are self-employed, you will be qualify on the basis of the income you pay taxes on. You will need to provide the lender with your Federal tax returns for the past two years.
Establishing a good credit history is by far the easiest way to qualify for a loan. Your credit card payments should be consistent, and your housing loan should not have any late payments within the last 12 months. Your total liability payments should not exceed 42% of your monthly income. You will also need to have a minimum of two month's worth of mortgage payments (assets and cash in reserves).
So if you've been a responsible payer for smaller loans, such as credit cards and car loans, then you will have no problem in getting your mortgage. You will show that you are financially responsible. Furthermore, you might be offered a lower interest rate on the loan, since you are a low risk borrower.
Tip: Don't make any major purchases until you've moved in. Credit inquiries can lower your credit score.
If your credit record is not that good, do not despair. You might try out for an adjustable rate mortgage until your record improves, or settle for a higher payment rate. Also, if you have the finances, a more substantial down payment than you originally planned will lower your risk as a buyer and get you your home loan.