Qualifying For A Home Loan

Much has changed in the past few years, when it comes to qualifying for a home loan. Below are the criteria most lenders are using today.

Credit Scores

You’ll need a credit score of 620 or higher to qualify for most loan programs. The better your score, the more loan choices you’ll have, and the better rates you’ll be offered. We can do a free credit check for you, and, in minutes, we can tell you your score. We also have customized software available that provides recommendations for raising your score in just 30-180 days.

Income To Debt Ratio – Home Payments

Your monthly home payment (including principal on the loan, interest on the loan, property taxes, insurance, and homeowners association fees) can’t exceed 30% of your gross income. For example, if you earn $4,000 per month, your home payment can’t go higher than $1,200 per month.

Income To Debt Ratio – All Debt Included

Your monthly home payment, combined with your other obligations and debts (such as student loans, car payments, credit card payments, etc.) can’t exceed 40% of your gross income. For example, if you earn $4,000 per month, all of your debt can’t total more than $1,600 per month.

Down Payments

In most cases, you’ll be required to come up with a down payment of 3.5% of the purchase price of your condo, townhome, loft, or house. This money can’t be borrowed, nor can it be provided by the seller. It can, however be a gift from friends and family.

Also, veterans of the U.S. armed forces may qualify for VA loans, which are offered at 100% of the purchase price of the home, meaning no money down is required.

For first time home buyers who close on a property before April 30, 2010, up to $8,000 in tax credit is being offered by the U.S. government, as part of the economic stimulus package passed in February 2009. Colorado agencies, including CHAFA, are making first time home ownership even more attainable by offering to loan you the down payment, which you can pay back in 2010, when you receive the benefit of your tax credit. For more information on this mortgage program and other first time home buyers programs, click here.

Loan Documentation

To qualify for a home loan, you’ll need to provide proof of your income and assets, including paystubs, tax returns, bank statements, and more.