8 Ways To Qualify For A Mortgage (Even If You Thought You Couldn’t)

qualify for a mortgage

Whether you are new to owning a home or just not as well versed as you’d like to be, you might wonder how to qualify for a mortgage. You won’t always be able to overcome being denied because of a payment that is “too high” for your income. However, there are still ways to qualify even if your lender says you do not qualify for a mortgage. You can still be approved. If you can present your case to the lender with enough evidence that you will be able to handle your mortgage payments without a problem, you can still qualify for a mortgage by using what’s called compensating factors. Here are 8 ways you can qualify for a mortgage:


How To Qualify For A Mortgage


Buy A Home That Has Low Payments


The increase in the expense of a home caused by taking on a new mortgage is known as payment shock. This means that if you were to pay $1,000 for rent every month, and your new mortgage payments were around $1,500 (including interest, property tax, principal, and homeowner’s insurance), your payment shock would be 50%. If you were paying $2,000 for mortgage payments on a $1,000 rent, your payment shock would be 100%.

Because of payment shock, your lender will be likely to assume you can only afford a payment mortgage equal to your current rent. If you have a case with the perfect payment history at your current rent payments for the past year or more, you will have a better chance to qualify for a mortgage.


Have A Record of Your Smart Savings


If you are regularly putting money into savings, you will see your money accumulate into greater reserves, which means you have more for a down payment and for mortgage payments. This will also prove to a lender that you have good budgeting skills as well as being responsible with your finances. Bonus: you can always use some saved for a house payment if necessary, which will demonstrate you will always pay, no matter.


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Show Proof of Increased Future Income


If you are able to demonstrate your future income being higher than your current income, you will have a greater chance of qualifying for a larger mortgage. For example, a recent graduate in a booming work-field or someone who has the credentials needed to push them up the ladder of success. If there was a doctor who recently finished med school and was starting in the field of medicine would have a good way to show proof of increase income in the future.


Save Two+ Months of Income for Reserves


Funds available for mortgage payments in case of interruption in income are known as reserves. Of course, having more reserves will show you are prepared for anything to happen. Lenders like to see at least 2 months of reserves for wage-earners and 6 for self-employed or commissioned employees.


Apply for A Government-Backed Loan


Government-backed loans like FHA loans, VA home loans, and USDA mortgages are usually more accepting of different compensating factors than conventional mortgage loans. As well, you could potentially have debt payments as high as 50% of your gross income, meaning you have a greater chance of getting into a home, even if you think you won’t qualify for a mortgage.


Show Smart Choices When It Comes to Credit


It can show great financial responsibility if you can show you have credit available but are not using it. As an example, if you have 3 different credit cards all with an available balance of a few thousand dollars but only have used $1,000 across all three cards. Maxed-out accounts put people in a poor financial position. If you have unused credit, it shows you do not have to depend on credit cards for your daily life.


Demonstrate Additional Income


Some of your income cannot go towards the chance to qualify for a mortgage, especially if there is insufficient history as proof. This could be income from commissions, a second job, overtime pay, or seasonal unemployment compensation. However, this means you can earn more in your life than you can show on paper, which is a pretty strong compensating factor.


Make A Larger Down Payment


Every single loan comes with a down payment minimum you must pay. This is so the lender can see if the home buyer truly has the money invested for the transaction, which means the more savings and money the buyer has invested, the more likely they will be to keep up with their payments. If you pay a larger down payment, you are showing your commitment. As an example, if you paid 5% down on an FHA loan when you only needed to pay 3.5% down, you could qualify for a mortgage or loan when you hadn’t qualified before.

If you thought you couldn’t qualify for a mortgage, a lot of the time you’re wrong. There are so many ways you can qualify for a mortgage even if you expect you will be turned down. Do not give up so easily! There are ways around it if you can legitimately prove to your lender that you are fully capable and qualified to take on the new home.

Leslie Rowberry

Leslie Rowberry is a Mortgage Loan Assistant and Real Estate Agent with over 14 years of education and 12 years of experience in various sectors of the industry. She is an expert in helping people buy, sell, or rent property, as well as having an in-depth understanding of credit, the different loan products offered in the United States of America, and all other aspects of the home buying process.

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