We all want a house we can call our own. But sadly, not everyone can afford to buy a house whenever they want. Thankfully, home loans are made even more affordable, helping average earners make a home purchase. The thing is, not everyone can afford a mortgage, even if they want to.
Mortgages are accessible nowadays. However, not everyone is granted a home loan. One needs to meet the minimum requirements before you can get approved for a mortgage. If you plan on applying for a mortgage soon, here are some tips that will tell you-you’re not ready for a mortgage yet.
Your Monthly Income Is Not Enough For Your Monthly Debts
Financial stability is essential when applying for a home loan. Your income needs to be able to accommodate your monthly mortgage aside from your monthly debt payments. You can use a mortgage calculator to check how much the costs will be with regards to your home loan.
You Don’t Have Enough Cash Reserves
While there are mortgages that allows no down payment, most will require at least 3.5% down for you to qualify for affordable loans which are FHA loans. You’ll also need enough cash reserved for at least 3-6 months worth of your home loan. This will give your lender enough reason to grant the mortgage to you since you’ll have something to use for mortgage payments in case you face a financial crisis.
Your Debts Are Out Of Control
How much debt you have will have a direct impact on your mortgage application. For example, you’re applying for FHA Loans Corpus Christi. As of 2019, you need to have a Debt-To-Income ratio of between 31%-43%. If your DTI ratio falls above the 43% ratio, you can get denied a mortgage.
You Keep on Changing Jobs
Job-hoppers usually have a hard time finding a lender who will approve their mortgage. The reason is simple – changing employment often usually means you pose as a high risk for lenders for not being able to have a stable income to repay the loan.
You Have A Bad Credit Score
Your credit score and history are among the things your lender will check upon application. For FHA loans, lenders will usually require a 580 FICO score. For VA loans, most will need at least 620 credit score. For bigger loans such as Jumbo Mortgages, a credit score of at least 700 to qualify. A good credit score will help you land better mortgage deals, rates, and terms.
You Failed To Pay Or File Income Tax Returns
Mortgage lenders will also check on your income tax returns when you apply for a mortgage. Whether you receive your Form-16 or not, you have to file and pay your income tax – otherwise, this can lead to penalties and even a mortgage rejection.
Recommended Read: Here’s what happens if you don’t pay your taxes
Your Previous Mortgage Applications Got Rejected
Your credit report won’t only show your credit history, but rejected loan applications as well. If you have credit mistakes in the past, make sure to wait it out and correct them before applying for a new mortgage.