When you qualify for a mortgage, regardless of what type it is or the amount of it, you go through the same basic process to get approved.
Following is a rundown of the basics of what lenders are looking for and how you can prepare yourself before you even apply for a mortgage:
Income: Lenders are looking to see two years of your income and employment history when applying for a mortgage. Be prepared to show full tax returns, and if you have changed employers in that period of time, have contact information for them as well. Self-employed and commissioned salespeople especially need to document their income.
Assets: Lenders of conventional loans are looking for two months of reserves so that borrowers have enough to cover the mortgage, along with property taxes and property insurance.
Borrowers looking for money under the Federal Housing Administration loan program must have enough income to qualify for both the mortgage payment itself plus other debts, including typical homeowner expenses like utilities and other payments.
Credit: This may very well be the most important of the three categories, in that even if you have a high income and lots of assets, you will have challenges getting financed unless you have demonstrated, via your credit history, that you are able to manage debt.
Lenders verify your credit history via a credit report, which consists of scores from the three credit bureaus, which are TransUnion, Experian and Equifax.
Making your payments on time is critical to keeping your credit score high.
Keeping balances on revolving trade lines like credit cards low, relative to their limits, tells lenders that you are able to handle the debt that you already have without needing to rely on all of your available credit each month.