5 Tips to Qualify for a Home Loan

The more prepared you are, the easier it will be to qualify for the home loan you need. Here are 5 tips to help prepare you for what's to come.

1. RECEIPTS

Hold onto your receipts for several months to discover where you spend extra money, such as doctor appointments, auto repairs, and impulse purchases. Add an average amount for these unexpected expenditures to your budget - which also includes your regular monthly expenses such as rent and utilities.

2. DEBT

Most lenders get uncomfortable if you have debt that exceeds 36% of your total income. Because this figure will eventually include your mortgage (typically 25-28% of your total income), you'll want to get the remainder of your debt (car loans, student loans, credit cards) down to 10% or less of your income.

3. DOWN PAYMENT

Generally, the larger your down payment, the better rate and overall costs on your mortgage.  Create a fund or savings account specifically for a down payment, aiming for a 20% down payment.  Instead of simply saving whatever’s left at the end of the month, choose a specific amount to save each month, and put that away when you pay the monthly bills.

4. JOB

If you've been in your current job less than a year, you may have to pay a somewhat higher interest rate. So, if possible, stay at your current job 2 years or more before applying for a home loan.

5. CREDIT HISTORY

If you don't have one already, obtain a credit card and make every payment on time. Do the same for all your bills to create a healthy credit history.