Big Factors for Home Loan Approval

Getting a home loan approval can be challenging for anyone. This is especially true if you have a lower credit score or other credit issues. There is good news. Today’s real estate market is improving and real estate lenders are offering home loan approval and real estate mortgages for lower credit scores. Regardless of your credit score you should be aware of the following factors that lenders review heavily before offering you a home loan approval. If you have a lower credit score focus on the other factors.

Key Factors for Home Loan Approval

Credit – This is rather obvious for most home buyers and other property buyers. Your credit score is among the most important factors in obtaining a home loan approval. Review your credit report and credit scores before applying for a real estate loan. If you notice discrepancies you should contact the credit bureaus and get all incorrect items removed.

Income and Employment – Your income and length of employment is very important when applying for a real estate loan or home mortgage. Lenders want to see that you have stable income and employment. A longer length of employment is viewed favorably by lenders. A larger income is also considered favorable by home lenders. You can still obtain a home loan approval with a low credit score if you have a larger income.

Down Payment – The amount of your down payment directly affects the total amount of your home loan approval. If you have a larger down payment you will qualify for a larger real estate loan. A low down payment doesn’t mean you cannot qualify but you may be restricted to a lower loan amount.

Debt – Your monthly debt payments (credit cards, car loans, student loans, etc.) all affect your ability to qualify for a home loan. Lowering or eliminating uneccessary debt can be helpful when you apply for a real estate loan.

Most lenders look at each of these items equally in terms of their importance for your home loan approval. If any item is lacking you should work to improve it before applying for a real estate loan. For some buyers it may not be possible to improve some of these loan approval factors. In that case it is important to work on the other items. Consider these examples:

Example 1
A home buyer has a lower credit score and cannot get it any higher before she must buy a home. The buyer arranges to save up a larger down payment of 15% in order to qualify for a home loan.

Example 2
A home buyer has a good credit score and average income but does not have a large down payment. The home buyer provided extensive documentation of their long-term employment history which resulted in a home loan approval.

Example 3
A home buyer has good income, an average down payment and average credit score. Their monthly debt payments are high. The buyer qualifies for a larger home loan by using their income to pay down some of their credit card bills and other debt.

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