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How to Qualify for a Mortgage

You don’t want to search for a home first and then find out if you qualify for it. If you have your heart set on a home, but later find out the bank won’t approve you, you could set yourself up for some major heartbreak.

Take these steps to qualify for a mortgage, then get to the fun stuff — searching for your home!

Step 1: Check your credit report first.

A lender will check your credit score during the mortgage process because it helps lenders determine how you pay back debt. Lenders typically look for a credit score of at least 620, though this mixes with factors like your debt-to-income ratio, down payment amount and more.

However, you want to check your credit report because many people find issues with their reports every year — loans that are still outstanding but which have actually been paid off, loans in your name that actually belong to someone else, etc.

Step 2: Compare lenders.

You don’t necessarily need to choose the most popular bank in your small town as your lender. You want to shop around by looking into various interest rates, fixed-rate mortgage and ARM options and customer service responses for particular lenders.

Meet with lenders and ask questions about the following:

  • Explain your situation and types of loans you might consider.
  • Ask a loan officer what they might recommend for your situation.
  • Get an idea of the interest rate, fees and monthly payments for the loan options recommended.

Step 3: Get pre-approved.

You may hear about pre-qualification and pre-approval during the mortgage process. Lenders who help you get prequalified ask that you provide some financial information before running your credit report with asset and income documentation verification. It’s a looser set of terms that may not end up being fully accurate when you actually apply for a mortgage.

A pre-approval goes one step further — it involves a credit check as well as an estimate of your income and savings.

Whenever possible, get a pre-approval. It’s usually more thorough or more accurate than a pre-qualification.

Step 4: Assemble your loan paperwork.

You must first provide the necessary financial information requested by your lender, which will include:

  • Two years’ worth of W-2 forms
  • A month’s worth of pay stubs
  • Income tax returns
  • Income tax returns, current profit and loss statement and list of all business debts if self-employed
  • Other financial information, such as how much money you have in savings, checking accounts and other types of assets such as stocks, bonds, etc.
  • Any other information your lender needs to know

Your lender will also want to confirm your down payment amount. Make sure you’ve saved enough for a down payment and closing costs. You may want to put down at least 20 percent on a conventional loan so you don’t have to pay private mortgage insurance (PMI). PMI is a payment you make each month to protect your lender if you can’t make your loan payments.

Step 5: Find the right real estate agent.

Certain online mortgage processes can occur quickly. This gives you an extremely accurate mortgage approval that you’ll be able to use with confidence when you’re getting ready to make an offer on a home.

Therefore, you’ll want to find the right real estate agent for your needs.

As a buyer, you can work with a real estate agent for free because the seller pays the real estate agent’s commission. Your agent will work on your behalf to show you properties, write an offer letter and help you negotiate. Real estate agents work hard to make sure you jump through all the legal hoops in the buying process.

The real estate agent and lender will walk you through the rest of the home-buying process, which includes:

  • Making an offer on a home.
  • Getting a home inspection.
  • Getting a home appraisal done.
  • Making sure you ask for the right repairs.
  • The closing process.

Along the way, make sure you ask plenty of questions to make sure you understand every part of the process. Once you’ve gone through the process once, you might want to move in a few years and the process begins again. Except this time, you might need to sell your current home. If you keep your real estate agent’s card, chances are, that individual might be able to help you sell your home as well.

Get a Mortgage the Right Way

As you can see, you’ll walk through a lot of steps to get the right mortgage for you. Your lender will want to make sure you have a good credit score, can show consistent income and have sufficient assets. Your real estate agent will want to know everything on your “wishlist” for your perfect home, among other things.

Get all the information ready for each party so the home-buying process goes off without a hitch. Understanding the different types of mortgages can also help you get ahead in the process, though you may need to ask questions about many other details.

These days, you can get a mortgage loan in a very short period of time, so start the approval process early (and save for your down payment and closing costs!) so you can get ready when the time comes.


This material is for informational purposes only and should not be construed as financial, legal, or tax advice. You should consult your own financial, legal, and tax advisors before engaging in any transaction. Information, including hypothetical projections of finances, may not take into account taxes, commissions, or other factors which may significantly affect potential outcomes. This material should not be considered an offer or recommendation to buy or sell a security. While information and sources are believed to be accurate, UNest does not guarantee the accuracy or completeness of any information or source provided herein and is under no obligation to update this information.