Steps To Take When Preparing To Qualify For A Mortgage Loan

In many cities, owning a home is much cheaper than paying rent. You also have the added bonus of being able to sell the home at a later date for a profit. If you're ready to take a step toward home ownership, you'll need to begin preparing to qualify for one of the mortgage loans with the lending institution of your choice. 

Establish Your Credit

Young house hunters will need to work on establishing credit if they haven't done so already. If you haven't had a car loan or a credit card to establish credit, there are a few things you can do. You can take out a small 6-month loan with your local bank and make the payments on time, or obtain a credit card that you only use for groceries. Pay off the groceries at the end of the month when the bill comes due. Forbes reports that most mortgage lenders look for a credit score of at least 620, so aim for a little bit higher than that. 

Stay in the Same Line of Work

Mortgage loans are given to individuals who have a steady work history. Typically, lenders look to see that you have no gaps in employment for a period of 2 years. In many cases, the mortgage company will also look to see that you have remained in the same line of work for that time period. Basically, if you are looking to change careers, it is best to wait until after you have moved into your new home. 

Tackle Your Debt

When applying for mortgage loans, the lenders will take a look at your income to debt ratio. The less debt you have, the higher your chances are at getting approved. Having a low debt will also help you qualify for a larger loan amount. Take a look at your debts and create a plan to tackle them. It may be worth it to hire a financial adviser to help you create a plan to bring that debt down to a level that will not affect your ability to buy a home. 

Save Up a Down Payment

Lenders are going to ask if you have any savings. They need to see that you have enough money for a down payment once you find a home that you like. Ideally, you'll want to have 20 percent of the purchase price of the home ready to put down. That means if you're browsing homes in the $200,000 range, you'll need to have $40,000 saved to put toward the purchase. 

For more information, contact companies like MainSource Bank.