What Does It Take To Qualify For A Mortgage?

Income is the driving factor that shows a lender your ability to repay a loan. Most loan programs have certain requirements for debt-to-income (DTI) ratios in order to qualify for a loan. It doesn't matter if you make so much money that your DTI is absolutely minimal or if your income is just enough to meet the minimum program guideline requirements that would be sufficient to clear this requirement - you would need to satisfy the minimum needed amount to qualify.  Either way, it becomes difficult to qualify for a mortgage loan if you don't meet the minimum required income amount for a particular loan program.

Some loan programs don't have any income requirements, some allow the use of bank statements to show income, some allow certain items from tax returns to be added back into qualifying income, some allow for asset depletion to count as income, etc. This is where it's crucial to have a knowledgeable loan consultant that knows the guidelines, requirements and how to calculate income to give you the best odds of qualification.

Assets are the funds that are needed to qualify for your mortgage loan. The total amount of funds required to qualify for a mortgage, including for down payment, closing costs and/or reserves can vary based on the loan product. Some loan programs require 0% down payment, some may require a minimum of  3%-5% down, some require 10-25% or more down, some programs allow for gift funds from family, friends or employers, some programs allow you to roll in closing costs into your loan amount, etc. 

It doesn't matter if you have millions of dollars in available assets or just enough to meet the minimum requirements for down payment, closing costs (if needed) and reserves (if applicable) - you would need to satisfy the minimum required assets to qualify for a loan. It doesn't matter if you have great income - if you don't have sufficient assets, it can prevent you from qualifying for a loan. This is why it's imperative to work with someone who knows the requirements and how to structure a file to help you qualify for the best loan options.

Credit can be very important as it can show a lender your credit worthiness, which can also determine the qualifying interest rate. However, not every program requires excellent credit, since credit worthiness requirements can vary based on the lender and loan program. There are some programs that are not credit driven at all, some that allow for late payments, bankruptcy, foreclosure, etc.

It doesn't matter if you have perfect credit or "less than perfect" credit scores - you have to meet the minimum credit requirements for a particular loan product regardless of your income or assets. This is why it's important to work with someone who not only understands the requirements but also how credit works in order to guide you on the best way to improve your credit worthiness, odds to qualify for a loan and best rates possible.

A "Mortgage" is a loan that is secured against a property as it's collateral. This is why the appraised value of a property is important to a lender, to determine how much they're willing to lend you. For example, if a home is worth a certain value, it's unlikely that a lender is going to be willing to give you a loan for greater than a percentage of that value since it would put them at risk of not recovering the full loan amount if you default on repaying the loan.

Some loan programs require an appraisal, some may require two appraisals, some don't require any appraisal, some only require an automated valuation model (AVM), etc. Having a seasoned loan expert not only helps gauge estimated values before paying for an appraisal, but it can also allow you to potentially qualify for options that can waive the need for a full appraisal, which can save you time and money.