Mortgage Loans 101: Basic Loan Requirements
If you have never tried a mortgage loan before, you might be wondering about how it works. You may have a lot of questions relating to it, especially if you are now considering taking one out. A mortgage loan is simples and complicated at the same time. Why? It is simple simply because you can have it approved and have your house within weeks if you have the complete requirements. On the other hand, it is also complicated because the conditions are not natural to fulfill.
There are many types of home loans, such as Jumbo loans in Texas, FHA loans, VA loans, USDA loans, ARM loans, and conventional loans. It is also often overwhelming to choose one of them since they have their advantages and disadvantages. In choosing, you need to consider your situation as well as your finances. You also have to foresee how it will be in the future.
But no matter what type of loan you will choose, the primary requirements will not change at all. There will always be the four basic requirements for every house loan.
Have a Good Credit History
The first thing every lender will look into is your credit. It is your passport in applying for anything relating to finances in the U.S. If you have a good credit history, which means all your accounts are current and you have no adverse credit report over the last seven years then you have better chances. It will continually increase if your credit score is also high. If you are aiming for government loans, then you need to have at least 580, but if not, the minimum is often at 640.
Have a Stable Job
Your job is also a primary requirement; it is because you need a source of income to pay the loan. Most lenders will require you to have at least two years of employment with the same company. For some, they will accept different companies within the two years as long as it is in the same industry. You also need to have a good employment history. If you have your own business, it should be operating for at least two years too and with complete documents and permits.
Have a Steady Source of Income
Your source of income is an essential detail in applying for a loan. Your finances will thoroughly get checked by your lender. So better, make sure that your bank accounts are clear. It means you should not have any negative or zero balance. Your credit cards should also be in current standing. Your payments should be on-time, and no misses.
Also read: How Mortgages Work
Have Enough Down Payment
When it comes to the down payment, the requirement for every lender is different. Although the standard is twenty percent, there are many lenders these days that offer much less than that. For example, the conventional mortgage accepts a down payment of ten percent wherein the FHA loan accepts 3.5 percent. The lowest one is the VA loan that often requires three percent only. Sometimes, it doesn’t even need a down payment. Same goes for the USDA Rural Housing loan.