The Sarmiento Team Real Estate Blog/buying/How to Qualify for a Home Mortgage

How to Qualify for a Home Mortgage

Thursday, March 14, 2024

Buying a home can be exciting! Especially if this is your first time. As a real estate agent, I take hundreds of calls every week from people who would love to buy their first home. But very few people actually end up achieving their dream of owning a home.

Entering the world of homeownership for the first time can be as daunting as it is exciting. I tell everyone if they are serious about buying a home they first have to get pre-approved with a banker. Most of the time I never hear from them again.

What I realized is that there is a step even before you talk to a banker. Knowing how a bank will qualify you is the crucial first steps in the journey towards owning your dream home.

As you navigate this path, being armed with the right information about everything from credit scores, verifiable assets, and debt-to-income ratios can profoundly impact your buying experience.  This guide aims to demystify the home buying process for first-time buyers, detailing  what banks will need to approve you for a mortgage.

Understanding The Mortgage Qualification Process

Understanding the mortgage qualification process involves considering various factors that lenders evaluate when deciding whether to approve a loan. Here's a breakdown of key aspects:

  • Income Verification: Lenders assess different income sources such as salary, military benefits, and investment accounts. The income must be stable and expected to continue for at least two more years.
  • Property Type: The loan's approval depends on whether you're purchasing a primary residence, a secondary property, or an investment property. Primary residences pose less risk for lenders.
  • Assets: Checking and savings accounts, stocks, and retirement accounts are scrutinized. Lenders require documentation for these assets. Banks want to make sure the money you are using isn't borrowed. This means they will ask you for your last three months' bank statements to ensure the money is "seasoned".
  • Understanding D.T.I. Ratios: Banks will lend you an amount of money based on your ability to pay back the loan. I'll post a whole another blog on how to calculate your front-end and back-end debt to income ratios which is a critical formula banks use.
  • Credit Scores: A high credit score signifies reliable borrowing behavior, influencing loan approval chances. The higher your credit score is the better interest rate you will qualify for.

What Documents Will You Need

When applying for a mortgage, there are several documents you will need to provide. These include

  • Proof of Income: Pay Stubs (30 Days)
  • Tax Returns: Last Two Years Federal Tax Returns
  • Verification of AssetsLast Month's Bank Statement
  • Credit: Authorization to Run Credit
  • Identification: Valid Federal or State Issued I.D.

So What's Next?

If you are serious about buying a home or just want to learn more, check out our free home buying course by clicking the image above! 

Our Free Home Buying Course is a complete A through Z guide on everything you need to know about buying your first home, all in one spot!

In our next post, we will cover how much money the banks will lend you based off of your income, debts and current interest rates. Stay tuned! 

The Sarmiento Sales Team

Andy, Damaris & Walter Sarmiento

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The Sarmiento Team

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