One of the biggest decisions you will make in your life may involve whether or not you can qualify for a home mortgage loan. There are many factors that go into determining eligibility, and some are more obvious than others. Here are 4 simple steps to follow to determine if you qualify for a home mortgage loan.
Step 1 – Calculate how much you can afford
Before you even start looking, figure out how much you can realistically afford to pay each month. Don’t forget to include your property taxes and homeowners insurance in your monthly payments, as well as condo fees (if you’re buying a condo) and home maintenance costs.
Step 2 – Select the right kind of loan
Before getting into whether you qualify, it’s important to decide what kind of loan you want. Generally speaking, there are two kinds of loans: fixed-rate and adjustable-rate. Fixed-rate loans are exactly as they sound—the interest rate remains unchanged throughout your entire loan term, and since it never fluctuates, so do your monthly payments.
Step 3 – Get Prequalified
With a prequalification letter, you’ll know what your monthly payments will be and how much of a down payment you can afford. This step helps make sure you are getting into something you can handle financially. Now that you know what sort of loan terms you’re working with, it’s time to start looking at homes.
Step 4 – Apply for the loan and buy the home
In order to apply for and close on your home loan, you’ll have to put together all of your documentation, including your proof of income, pay stubs, and financial information.
This can be done through face-to-face meetings with your lender or by filing out electronic applications online. Once your application is reviewed and approved by a lender representative, you’ll likely need to provide additional documentation before moving forward with securing financing on a specific property.