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Qualifying for a Mortgage in Today’s Market

Mortgage lending standards can change over time, so make sure you are up-to-date on lender requirements before you apply for a home loan. 

Since the process of qualifying for a mortgage can be complex and detailed, some believe it’s one of the hardest types of financing to secure. Contrary to what you might have heard, getting a home loan isn’t overly difficult. If it were, no one would own a home. Preparation and an understanding of what lenders want are keys to a smooth closing.

Credit Score Needed to Buy a House 

Your credit history is one of the biggest deciding factors in whether you qualify for a mortgage. You don't need perfect credit to buy a house, but you do need to meet the minimum credit requirement. 

A pattern of late payments, high credit card balances, judgments, collections and a bankruptcy can hurt your chances of getting a home loan, depending on the age of negative information. The credit score needed to buy a house varies, but most home loans require a minimum score of 620. 

Low credit score requirements help borrowers who’ve made past credit mistakes qualify for a mortgage while in the process of rebuilding their scores. 

Get Your Documentation

The days of no-doc mortgages are gone. Qualifying for a mortgage in today's market requires tangible proof of assets and income. Your lender will scrutinize your financial background to ensure that you’re capable of repaying a mortgage. You'll provide your W-2 forms, most recent paycheck stubs, tax returns for the previous two years and bank statements.

Mortgage Down Payment Requirements

Most lenders today require a down payment. The only exceptions are a VA home loan, a USDA home loan or another 100% financing product. 

Down payments start as low as 3% to 5% for a conventional home loan and 3.5% for an FHA home loan (if your credit score is between 580 and 620). 

Talk to your lender about down payment assistance programs if you are ready to buy, but short on cash. These programs are sometimes income-based. If eligible, grant funds received through the program can cover all or a portion of your down payment and closing costs. 

Home Appraisal Process

Even with perfect credit and adequate income, a lender doesn’t officially approve a mortgage until after a home appraisal. Regardless of whether the seller accepts your offer, your lender sends a home appraiser to the property to determine its market value. 

After completing a walkthrough of the property and comparing the home with similar homes in the area, the appraiser assesses the home’s value. Your lender will not approve a loan amount that exceeds the home’s value. So if the appraisal comes back low, you’ll have to renegotiate the sale price or pay the difference between the sale price and the appraised value out-of-pocket

Get Answers to Mortgage Questions

It can be difficult to comprehend mortgage terminology and understand how different programs work. You don't have to figure it out alone.

Cherry Creek Mortgage is committed to providing satisfying answers to your mortgage questions. We can explain the process and help you find the best home loan based on your income, credit score and available resources. 

Upon a financial review, we’ll determine how much you can afford to spend on a property, and then issue a mortgage pre-approval letter. This letter gives you the green light to start shopping for a house. It also gives you negotiating power because a pre-approval shows that you’re a serious buyer. If a property you’re interested in buying receives multiple offers, the seller may choose your offer over a buyer who hasn’t been pre-approved.

Bottom Line

Some people think it's difficult to get a mortgage. But if you do your research and understand basic loan requirements, you shouldn’t have a problem getting a loan. Let our mortgage lenders work on your behalf. We’ll find you a home loan whether you’re a repeat buyer, a first-time homebuyer or refinancing.