How to Qualify For a Mortgage
                     How to Qualify for a Mortgage 
 
The lender usually scrutinizes the financial grounds of the borrower, including their credit score 
and whether they will be able to pay back. In short, whether the borrower is worth the risk is 
checked by the lender. But what is needed to qualify such scrutiny? Here are the specific factors 
that lenders consider before you get mortgage approval. 
 
Basic Income 
The first factor the lender checks is the primary income of the borrower. There is no minimum 
amount of dollar you must earn to apply for a mortgage. However, the lender checks the 
financial background to estimate whether the borrower can pay back while managing other 
bills. 
 
Thus, the primary and steady income is an essential criterion for most lenders. Reliable and 
regular sources of income are also considered; this includes military benefits, child support 
payments, alimony, commissions, social security payments, etc. 
 
Down Payment 
Most lenders prefer when your down payment is at least 20% price of the mortgaged house. 
However, some mortgages require you to pay less. However, a lesser down payment also 
means the lender's scrutiny would be more stringent than ever. This is because they often 
doubt the chances of paying back from the borrower when they cannot afford a high down 
payment. 
 
If the borrower cannot pay a 20% down payment, the lender usually requires private mortgage 
insurance or PMI to protect against potential losses. 
 
The Assets You Own 
Besides the mortgaged property, lenders are likely to inquire about the assets you own to 
ensure if the borrower can pay the premiums even during a financial crisis. This is because 
assets refer to things of value that you own, which can aid in paying the premiums even during 
a financial crunch.  
 
Savings and checking accounts, IRAs or any retirement accounts, mutual funds, stocks, bonds, 
and certificates of deposit all qualify as assets. 
 
Debt Ratios 
The debt-to-income ratio is also considered before a borrower qualifies for a mortgage. Debt 
ratios can be of two types.  
 
The first type is the housing ratio or front-end ratio. It refers to monthly payments along with 
other costs incurred from ownership. Next, the total amount is divided by gross monthly 
income to determine your housing expenses. 
 
The other type is the back-end ratio, where all the ongoing monthly installments of debt, 
premiums, credit cards are considered together with house expenses. This must be divided by 
gross income too. To qualify for a mortgage, the ratio should not be more than 28% of your 
gross income from the front-end and 30% from the back end. 
 
However, the guideline varies based on the gross income. For example, someone with a high 
gross monthly income can even have 40%-50% ratios. 
 
Credit Score 
A credit score is a three-digit number that gives the lender an idea about your reliability as a 
borrower. When the credit score is high, it indicates that you pay off the bills in time. 
Conversely, a lower credit score means you have more debt than you can afford and will 
possibly fall short while paying back. 
 
To qualify for a mortgage, your FICO credit score must be above 620. The only loan you can be 
eligible for with anything less than this, but more than 580, is the FHA loan. 
 
The mortgage is all about calculated risk both for the lender and borrower. However, having a 
better understanding of the eligibility criteria helps one improve their chances of getting their 
appeal for a mortgage approved.