What is required to get a home loan?


Quick Answer

To get a mortgage loan, borrowers need a down payment, a limited number of debts, and a good credit and employment history. Mortgage lenders often like to know how borrowers make their money and the connection between the borrowers' income and expenses.

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Full Answer

It's best that borrowers aim for at least a 20 percent down payment on a home. Contributing as much as possible on the down payment allows borrowers to create equity in the home. Borrowers should have bank statements that prove they have the funds necessary for the proposed down payment. Borrowers who make a low down payment are usually required to purchase private mortgage insurance.

A majority of lenders prefer that borrowers' combined monthly debts and monthly home ownership costs exceed no more than roughly 35 percent of the borrowers' total monthly income. Monthly debts include credit card bills, student loans and car loans. To calculate this percentage, lenders divide the borrowers' pre-tax income by the income devoted to monthly debts. The final sum should include property insurance and taxes.

Having a high credit score can improve the borrowers' chances of receiving a good rate on the mortgage. Borrowers with an average or low credit score may be approved for a loan, but it may come with a high interest rate.

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