Home Financing – How to Qualify For Your First Home Loan

Home financing for the first time may seem challenging, and for the right reasons. After all, every home buyer seeks mortgage programs with flexible guidelines and low down payments. However, qualifying for a good home loan is always a daunting task, whether you’re a first-time or a frequent buyer. So, what is it that helps you qualify for your first home loan easily? Here’s a guide to help you get started.

Understand What Mortgage Lenders Are Looking For

Understanding what most mortgage lenders are looking for can require a bit of homework. However, it’s important to note that the eligibility criteria will not always be the same. In most cases, it will vary based on the loan type and lender. Here are a few factors that remain common among those requirements.

Consistent Income

Most lenders will immediately ask you to provide proof of employment and consistent income in the form of pay stubs, tax returns, etc. This is because they want to ensure you can afford to repay the loan. They may also consider your financial emergency assets, such as the properties you own, money market accounts, etc.

Credit Score

The credit score is one of the most important factors your mortgage lender considers. A good score showcases your ability to repay loans on time and portrays reliability.

However, there is no universal credit score requirement because it usually depends on the type of mortgage you’re seeking. A conventional loan may require you to have at least 620.

It’s also possible to qualify with a lower score for other types of mortgages, such as the ones backed by the US Department of Agriculture and the Federal Housing Administration. The rule of thumb is to ensure that your credit score is high because the higher it is, the better your chances of qualifying for a good interest rate.

Down Payment For Home Financing

The down payment you’re required to make also depends on the type of mortgage and lender. Conventional mortgages usually require 3% of the property’s purchase price.

However, most people prefer putting at least 20% into the down payment to avoid PMI (Private Mortgage Insurance). The good news is that a USDA (US Department of Agriculture) loan doesn’t require a down payment.

Most lenders assess the risk involved by looking at the money you put down. This means the more down payment there is, the lesser the risk for them. This isn’t it. A large down payment also reduces your LTV or loan-to-value ratio, which is another appealing factor to lenders.

DTI or Debt-to-Income Ratio

The DTI ratio is basically the amount in monthly debt payments you owe compared to the income you earn. Typically, it shouldn’t be higher than 50% if you wish to qualify for a mortgage. Lenders also take your housing expenses into account when determining whether you’re a good fit for the loan. These expenses may include your property taxes, homeowner’s insurance, and your mortgage.

Home Financing – Types Of Mortgages

Determining the type of loan that fits your needs best is another important step when you’re seeking qualification for a home loan. This is where your real estate agent from Robert DeFalco Realty can help. Since they’ve dealt with a number of mortgage lenders, they can help you determine the right mortgage type for your needs.

Government-Backed Vs. Conventional Loans

The latter is usually provided by a credit union or a private lender, and it tends to have firm eligibility requirements. Furthermore, they may also consist of higher down payments.

Hence, your credit score needs to be perfect. On the other hand, platforms such as the USDA and FHA provide loans borrowed through individual lenders, but the federal government is actively involved in insuring the funds. Since these loans aren’t too risky, they also come with flexible terms.

Variable Vs. Fixed Rate of Interest

Fixed loans, as the name suggests, are the ones that stay the same each month. They’re also considered a safe bet because you know what you’re supposed to pay each month.

Variable loans might appear less expensive in the initial time period. However, they keep resetting throughout the term of the loan. This means there’s a good chance of your interest rate increase in the future. It may also result in affordability issues later on.

Longer Vs. Shorter Term Loans

The duration of your loan also has an impact on the cost. A short-term loan may help you save money on interest, but it may involve high monthly payments.

On the other hand, a long-term loan can help you get affordable monthly payments, but the interest paid over time is much higher than what you would’ve paid for a short-term loan.

What Documents Do You Need For a Mortgage Application?

Once you’ve assessed the rest of the factors, start preparing your mortgage application carefully. Lenders usually ask for proper documentation to start the approval process. Here’s everything you’ll need to provide.

Proof Of Income

Providing solid proof of income is imperative if you’re seeking a reliable home financing option. From pay stubs to tax returns, you will need to add every bit of documentation to prove that you’re trustworthy and able to repay the loan.


If you have any outstanding debts or existing home loans, your lender may ask you to provide documentation for them.

Additional Documentation

Additional documentation will depend on the additional requirements of your lender. For instance, if you rent currently, they may ask the homeowner for proof that you pay on time. If you’ve recently sold something, you may also need to provide documentation for that sale.

Here’s How Robert DeFalco Realty Can Help

When it comes to buying a home, you do not have to do it alone. With the type of intricacies and documentation involved, you will require assistance from our knowledgeable and trained professionals on board at Robert DeFalco Realty so you can secure loans faster and get your dream home instantly. For more information, call us at 718-987-7900 or fill out our form online. You can also visit our offices for a face-to-face consultation with our real estate agents.