How do you get approved for a home loan?


Quick Answer

A potential homeowner gets approved for a home loan by having a good credit score, saving the money for a down payment on the home, maintaining steady employment and keeping down personal debt. It is also important to have documentation to prove financial stability to qualify for a loan.

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Full Answer

A good credit score enables a homebuyer to get lower interest rates and pay a lower down payment. A poor credit score makes it difficult to secure a mortgage. Potential homeowners should work on maintaining a good credit score long before trying to get a home loan by paying bills promptly, keeping a low debt-to-income ratio, applying only for needed credit and not closing accounts unnecessarily. A bank statement and other documents are needed to prove the homebuyer has enough assets to cover the closing costs of the loan and a down payment of 3.5 to 20 percent of the value of the home, depending on the type of loan secured. Recent pay stubs are necessary to prove steady employment and salary. To prove income and assets, copies of tax returns, W-2 forms and bank statements are needed.

A potential homeowner should carefully shop around for the right lender, looking carefully at fee structures, interest rates, down payments, prepayment penalties and other details. Sometimes lenders offer borrowers generous loan amounts based on their documented financial situation, but homebuyers should only borrow what they can reasonably afford to repay.

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