5 Steps on How to Qualify for a Home Loan - Keep Your Credit Clean

5 Steps on How to Qualify for a Home Loan

/ 01:58 AM January 26, 2019

Steps to Qualify for a Home Loan

You can easily get a home loan in a couple of weeks. One of the problems people face while applying for a loan is ‘poor credit score’. We’re going to dissect this in detail later, but for now, have it in mind that no bank would turn a blind eye to your credit score before giving you a home loan. Every single credit score report is relevant to the loaning process. This piece will teach you how to apply and how to qualify for a home loan with the usage of debt to income calculator, and how much house you can afford by the rule of thumb.

Below are the 5 Steps on How to Qualify for a Home Loan;

Search for a Home Loan That’s Suitable for Your Income Status

5 Steps on How to Qualify for a Home Loan


Basically, there are two types of home loan, according to the mode of payment; the fixed-rate mortgage and the adjustable rate mortgage. The fixed-rate mortgage offers you rates that will not change for the entire life of the loan.  Depending on your credit score will determine what the rate will be. Adjustable rate mortgage interest usually begins at lesser payments but has a probability of increasing at any time.

Read through the criteria of the loan you’re applying for. Once you’re able to get a loan that fits your income, you’ll be considered for equity and tax deductions. It’s advisable to wait till you find that perfect home loan.

Decrease Your Debt-To-Income Ratio

5 Steps on How to Qualify for a Home Loan

Your debt-to-income ratio is quite essential while applying for a home loan. Usually, lenders observe your debt-to-income ratio before considering you.

Getting a loan is one thing, paying back is another. Your debt-to-income ratio indicates the possibility of you paying back the loan. Make sure your credit card balance is low as possible, in order to be considered for lower monthly payments.

Analyze Your Credit Report

5 Steps on How to Qualify for a Home Loan

As mentioned earlier, your credit score is a great factor and the only way to know your credit score is by requesting your credit reports. Request from the three credit bureaus, TransUnion, Equifax, and Experian. Go to www.annualcreditreport.com to get your free credit reports. After getting your credits report, it’s necessary to check for errors and negative accounts. If you detect any inaccurate data, you can query it directly from each credit bureau. Any unverified error is legally removed after 30 days.

Maximize Your Credit Score

5 Steps on How to Qualify for a Home Loan

The Mortgage Process: Some mortgage programs require a minimum of 620 credit score while the FHA requires only 580 credit score in some cases. First-time buyers are often considered regardless of their lower credit score when compared to an average American.

Improving your credit score doesn’t take forever. It can be increased by taking these two steps;


  1. Increase your FICO score by 30% by paying off your credit card balance.
  2. Demand for the removal of all collection accounts by contacting your collection agency. Collection account damages your credit score. You might have to pay before these accounts are deleted.

Know the Worth of the House You Want to Buy

5 Steps on How to Qualify for a Home Loan

Again, this is highly dependent on your debt-to-income ratio. Your DTI ratio is calculated by comparing your monthly obligations with your monthly income. Your DTI is expected to be lower than 36% while buying a new home.

There are lenders who accept DTI ratios higher than 41 but it isn’t advisable. Do not bite more than you can chew: just in case of an emergency. Higher DTI ratios come with higher risk and you could be hit below the belt when the bad time arises.  

Get Pre-Approval From Your Mortgage Bank

5 Steps on How to Qualify for a Home Loan

No real estate agent would attend to you without a pre-approval letter. You need to see your mortgage lender. They’re always ready to attend to you. All you need to do bring along necessary documents, as stipulated on the companies site. The documents required depends on the bank.

To get pre-approved, the lender needs to verify your credit score, monthly income, bank statements, and other necessary documents. You’ll need to bring this pre-approved letter along with you before making an offer on a house.

Note: not all lenders have the same requirements. It’s better you make inquiries from many lending agencies before settling for one. The states are filled with a lot of first-time grants and down payment assistance. All you’ve got to do is keep searching. Having knowledge of various loan quotes is a huge plus for you. It gives you an edge while negotiating with your lenders.

Final Thoughts on Home Loan Qualifications 

5 Steps on How to Qualify for a Home Loan

While a good credit score is important, you must be sure you’ve got the financial capacity for a house loan. As recommended earlier, it’s better to choose a house loan with low DTI ratios. If you follow these home loan steps carefully, the loaning process will be very easy and swift.

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