Five Factors that Prove You’re Worthy of a Mortgage

Have you read or heard reports about tougher mortgage lending guidelines? If so, you might fear applying for a mortgage—although you feel ready to purchase. This is a normal feeling, but you shouldn’t let fear stop you from moving forward. Just because getting a home loan has become harder in recent years doesn't mean you have to sit on the sidelines. Actually, you might be more qualified for a home loan than you think. Here are five factors that prove you're mortgage-worthy.

1. You have mortgage-worthy credit

Good credit is one indicator that you're ready for a mortgage, but don’t think you need a perfect 850-credit score to qualify for a home loan. Obviously, the higher your credit rating, the better. This typically results in the best mortgage rate. However, even if you don't have the best credit score, a conventional lender will approve your application if you have a 680 or higher credit score. If you apply for an FHA home loan, you can get approved with a credit score as low as 500 to 620, depending on the lender.

2. You have a good rental history

If you’ve been renting for years and have never missed a rent payment, odds are you're a good candidate for a mortgage. To accurately gauge whether your mortgage-ready, future mortgage payments should be comparable to what you're currently paying in rent. If you can handle rent payments with no problem, handling a mortgage shouldn't be too difficult.

3. You’re ready for a long-term commitment

Buying isn’t for everyone. Some people rent because they prefer the flexibility of picking up and moving every few years. If you're ready to put down roots and stay in one place for years to come, buying can be financially rewarding. Rather than waste money on rent, you can build equity. Since buying a home involves closing costs, you’ll need to stick around long enough to recoup these expenses, about two to three years.

4. You know what to expect

Some people rush and buy a house without knowing what to expect. If you’ve done your research and know what lenders expect from borrowers, this also proves you’re mortgage-worthy. You’ve probably saved enough for your down payment and closing costs, and you’ve kept accurate financial records over the past two years. Also, you know what to expect from the time you submit a bid to the time you close on the home loan.

5. You take a lender’s advice

Sometimes, lenders have to reject home loan applications. This doesn't mean you'll never be mortgage-worthy, but you will need to make improvements in certain areas. Maybe you need to save more or clean up your credit. The loan officer will explain the reason(s) for the rejection and offer recommendations. Take these suggestions seriously and make the necessary improvements. If so, you may qualify for a loan in a few months or years. Fear of rejection can be paralyzing, but it doesn’t have to be. If buying is your goal, take steps to prove you’re mortgage-worthy. Research and prepare your credit and money in advance. If you know what lenders look for in applicants, you’ll be in a better position to meet their expectations.