How to Get a Home Loan

Buying a home can come with a real sense of accomplishment. It's a significant milestone that many people dream of hitting. However, getting a mortgage can also be a daunting process. Purchasing a home is the biggest investment you'll ever make, and getting there involves a ton of paperwork.

This blog will review some of the paperwork involved and dive into what lenders are looking for before approving your home loan.

Income

Of course, lenders will only give you a loan if you have a steady source of income. There's no specific income threshold, but lenders will look into where your money comes from and how stable your income is. For most people, that means looking into your job history. They'll also investigate other income sources, such as alimony, child support, etc.

Assets

Lenders also look into your assets. They want to know that you have money saved and can make payments even if you encounter financial troubles. Be prepared to provide your Bank of America banking info. They'll use it to look at your savings accounts, retirement accounts, and taxable investments.

DTI

DTI stands for debt-to-income ratio. This calculation strongly indicates your ability to repay your loan and gives lenders a closer look at your cash flow.

Simply put, your DTI is a ratio that reflects your monthly debt payments compared to your monthly gross income. In addition to looking at your assets, lenders will use your Bank of America banking info to see how much money you have going in and out. They'll add up your recurring debts like credit cards, student loans, and auto loan payments. Then, they divide it by the income you're bringing in every month.

Generally, conventional mortgage lenders will not approve loans if your DTI exceeds 45 percent. However, some government-backed loans may have higher thresholds.

Credit Score

Your credit score will come into play as you apply for mortgages. Credit scores reflect your history of handling debts. Several missed payments can result in a low score that disqualifies you from many lenders.

Conventional mortgages usually require a score of at least 620. Government-backed loans may accept as low as 580. But even still, a higher score will give you better options and lower interest rates.

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