How do I qualify for a mortgage? | Qualifications for buying a house | Roost
Register for a live demo of how Roost works!
Advertising disclosure

Our goal is to share information and products that are truly helpful to renters.

If you click on a link or buy a product from one of the partners on our site, we get paid a little bit for making the introduction. This means we might feature certain partners sooner, more frequently, or more prominently in our articles, but we’ll always make sure you have a good set of options. This is how we are able to provide you with the content and features for free. Our partners cannot pay us to guarantee favorable reviews of their products or services — and our opinions and advice are our own based on research and input from renters like you. Here is a list of our partners.

What does it take to qualify for a mortgage?

Spoiler: it’s not as complicated as you might think

Buying a new house is not rocket science. In fact, over 60 percent of the homes in the U.S. are owned by individuals. Yes, there is a lot of paperwork involved. And yes, you need to have good credit. But it is not as out of reach as you might think. With diligence and patience, you can qualify for a mortgage and become a homeowner too.

In order to qualify for a mortgage, there are a number of boxes you need to check, and those boxes vary a bit depending on the kind of mortgage you’re looking for. Read on to find out what you need to know to prepare yourself for qualifying for a home mortgage.

Need to repair your credit?

How to qualify for a standard mortgage loan

Most borrowers will end up pursuing a standard loan from a bank or credit union. Other loans (detailed below. Stay tuned!) have certain qualifications that must be met (military service, rural locations, etc.), so a standard loan is the type of loan that applies to most borrowers and is the kind that most lenders offer. 

What your lender needs to qualify you for a standard loan

  • Your down payment: This is how much you are willing to pay upfront. This will have a huge impact on your loan, as it will affect the insurance rate you get from your lender as well as the bank’s confidence in you. It’ll even have an impact on how much you pay over the life of your loan. Generally, you’ll be looking to put between five and 20 percent down, though that may vary.
  • A job: You’ll need to show proof that you have a regular income. Generally, this means demonstrating that you are, indeed, bringing in money every month, which you’ll then use to pay off the loan. Certain specific types of loans have particular income ranges attached to them, but, generally, it’s up to your lender to figure out if you’re raking in enough dough.
  • Your credit score: The above figure is an important part of your credit score. This extremely important number (which falls between 300 and 850) takes into account your credit and payment history and the amount and type of debt you carry to sum you up in a single number. It’s a figure that lenders take seriously, so you should keep close tabs on yours to make sure it’s strong enough to get a good loan.
  • Your debt-to-income ratio: This is a number (usually expressed as a percentage) that indicates the relationship between the money you make and the money you owe. If you have lots of debt (car payments, credit cards), you can be okay if you have substantial income, but if you don’t, you’ll want to keep your monthly debt down.
  • Mortgage insurance: In most cases — especially if you put less than 20 percent down — your lender will require you to take out mortgage insurance. Mortgage insurance will protect your provider if you stop making payments. It’s something you pay for but your lender benefits from, so it might seem like an annoyance, but trust us, it’s a good thing to have. The lender has all the power in this process and you’ll want to make sure they feel comfortable with you as a borrower.

Alan Rosenbaum, founder, GuardHill Financial, emphasizes several of these points. “Some of the most important factors that lenders analyze when ones apply to qualify for a mortgage include income, employment history, and credit score,” he says. “Lenders prefer to see a steady income and employment history, and a good credit score.”

Rosenbaum also notes that the current coronavirus pandemic has had an impact on the market, “Right now, many big banks and other lending institutions are experiencing delays, which may set the borrower back in their financing journey.”

See if you qualify for a debt consolidation loan

What you need to qualify for a standard home loan

Above we outlined the most important factors that come into play when you’re applying for a mortgage — at least, those are the things your lender is looking for.

But there are also a few things that you’ll want to keep track of for yourself so that you can be well prepared when you walk into the loan office to make your case (pro tip: make sure you use strong deodorant that day in case you get nervous!)

  • Check your own info: Take a look at your credit report to make sure it’s up-to-date and free from errors. Give it a once over and, if you spot any errors, take some time to sew those up before you start your application.
  • Calculate your target budget: There are some great tools online that will help you calculate the range of mortgage payments you can afford every month. This will help you figure out what houses are in your budget and help you sound prepared when you speak to the loan officers.
  • Figure out your down payment situation: Can you afford to put 20% down? Can you only afford 5%? Will you need to seek out an alternative loan to see if that’s best for you? Knowing what size down payment you can afford can go a long way toward preparing you for the rest of the process.
  • Paperwork: In order to prepare this whole process, you’ll want to get some paperwork ready in advance. You’ll thank yourself when you don’t have to scramble in the back of your sock drawer looking for old tax returns. Here are some documents you’ll want to dig up and have ready:
    • Two months worth of bank statements
    • Pay stubs going back a month
    • Two years worth of tax info (W-2, 1099 forms and federal tax returns)
    • Any other proof-of-income documents you may have (stocks and bonds, etc.)
    • Any specific forms required if you’re applying for a specialty loan

Other types of home loans

In addition to the standard loans, there are some specialized loans that you might be able to apply for.

Most of these have similar requirements to a standard loan: they’ll want to look at your debt-to-income ratio, your credit score, and the like. But they may have lower thresholds, or they might have other specific requirements that you’ll want to look into before you apply.

FHA loans 

The Federal Housing Authority (FHA) provides loans for people — especially first-time homebuyers — who may be struggling to get a standard loan. Once again, the lender will look at your debt-to-income ratio, your income, and employment information.

But the FHA’s requirements are a bit easier in some regards. They’re only looking for a 3.5% down payment and can accept credit scores as low as 500. In addition, they’ll be looking for two forms of mortgage insurance to give them the peace of mind that they need to give you the loan.

VA loans

The Department of Veterans Affairs (VA) oversees these loans for active-duty military personnel and their families. They’ll be looking at your debt-to-income ratio and your credit score like a standard loan, but there are other qualifications to keep in mind. It requires no money down and you don’t need mortgage insurance.

You will need a Certificate of Eligibility from the VA and you may need to pay a funding fee, which varies from case to case.

USDA loans

The United States Department of Agriculture (USDA) offers loans to low-and medium-income families in rural areas. So, the first thing you’ll want to do is to take a look at the USDA designated areas to see if you’re looking to buy in a qualifying area.

For these loans, you won’t need mortgage insurance or a down payment, but you will need to lay down a guarantee payment, typically about 1%. Other than that, your lender will look at your debt-to-income ratio, employment, and income information, and credit score, which needs to be about 640 in order to qualify.

Final thoughts

The lender is taking a chance on you by lending you money. So your job is to make sure you can show them that the risk is minimal.

If you have any issues, you can take your time and fix them and get yourself in the best position to qualify for a home mortgage. If you find out you’re already in great shape, then you can dive right in — gather your documents and get started. Get that mortgage and get that much closer to your housewarming party!

Working on your credit?

A quick note! Our goal is to gather and share info that’s up-to-date and helps you make great decisions as a renter. That said, the information you get directly from a provider could be a little different. Make sure to review their terms and conditions directly; and, if you see anything here that needs to be updated, please let us know! Advertising disclosure
Last Updated: March 3rd, 2022