FAQs about Loans

How much income do I need?
Lenders look at the overall debt-to-income ratio. They like to see that your monthly housing payment, plus everything on your credit report, is not more than 50% of your total gross monthly income (before taxes).

If you want to buy a $100,000 home, the monthly payment will likely be $1,000. Suppose you also pay another $500 each month in other bills that are on your credit report. That's a monthly debt of $1,500. You would need to earn about twice that, or $3,000 a month, to qualify for the home loan, typically.

What type of credit do I, as a buyer, need to have?
For an FHA loan, which is very popular, buyers generally need to have clean credit for the past 12 months, meaning that payments have been made on time. Many lenders don't worry about credit problems that took place in the past, as long as the past year is good and clean.

Do I need to find a home first?
It's a very good idea to pre-qualify for a loan. That is, to find out how much of a loan you can qualify for, and kind of monthly payment you are comfortable with. The financing is the most emotional part of the home buying process, and with that taken care of, shopping for a new home can be very enjoyable.

How do I get started?
Contact a mortgage company and be ready to provide the basic documentation that will help them fill out your application, such as identification, Social Security number, paycheck stubs, etc. Most lenders can provide you with a checklist of items you will need, to help you get started.