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Buying a car, going to college and purchasing a home are all usually aided by requesting a loan from a lender.

Not only is it the first step in home ownership, but the process of taking out a loan also represents the whole character of the borrower. Their financial history is laid bare, their debt, their assets, even a qualitative assessment of the person themselves factors in to taking out a loan.

If the lender likes what they see, and they are able to discern that the borrower has a good chance of completing repayment of the loan, then a line of credit large enough to purchase a home may be extended.

Buying a car, going to college and purchasing a home are all usually aided by requesting a loan from a lender. There is always an application process and that process hinges on a few important factors.

Factors that may affect your eligibility for a mortgage loan:

  • Down Payment – The larger the down payment, the less you will have to borrow and the more equity you will have.
  • Credit score – Credit scores are vital when it comes to securing a good rate on a home loan.
  • Debt to Income – A comparison of expenses and debt obligations to earnings.  Equally as important as your credit score.
  • Pay Stubs, W-2 forms, Bank Statements and Job Histories – Bring a portfolio of financial statements to the application process. Nothing is off-limits and the lender may ask for any of these items.

The idea of filling a burlap sack with money and sliding across the table to get the keys to a home is humorously out of touch with the realities of modern day home ownership. These days, buying a home almost always requires taking out a loan with a lending institution.

While taking out a mortgage is considered debt, many believe that a mortgage is considered “good debt.” Since the value of a property is likely to rise, a mortgage is viewed more as an investment as opposed to bad debt like carrying a balance on a credit card.

Related Information

Conventional vs. FHA - Understanding the differences between Conventional and FHA loans is one of the most important first steps in the process of buying a home. Each option has its advantages and drawbacks.

Fixed vs. Adjustable - This introduction will provide some insight regarding fixed and adjustable rate mortgages.

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