Home Home Loans Plan now to qualify for a home loan later

Plan now to qualify for a home loan later


A home is one of those things that you can’t just walk out and buy. In fact, most of us need to borrow a large amount of money in order to purchase a home. However, since a home loan is so large, and the bank is taking a risk on you, not just anyone can qualify for a home loan.

If you know that you are going to need a mortgage at some point in the relatively near future, you need to prepare ahead of time. You need to plan now to qualify for a home loan later.

Establish and maintain good credit

The best thing you can do to prepare for a home loan later is to establish and maintain good credit. If you don’t have good credit, it is very difficult to get a home loan — especially one with a competitive interest rate. Lenders want to see that you have had experience with credit in your past, and that you handled it well.

You can start establishing credit with a credit card (pay off the balance each month), car loan, or small personal loan. Make all your credit and non-credit payments on time and in full, and make it a point to keep your debt levels low.

Try to hold a steady job

Because the lender is taking a risk on you by putting up a large sum of money, it makes sense that your income will be scrutinized. If you can keep the same job for six months to a year prior to applying for a mortgage, you will be in a much better position.

Job-hopping does not inspire confidence in a lender, so try to establish a regular source of income. You can even do this when you are self-employed. I was able to get a low-rate mortgage based on my self-employed income by showing tax returns that indicated regular income, as well as agreeing to an income audit that showed that I had been growing my business solidly for multiple years.

Save up for a down payment

Make it a point to save up for a down payment and build other assets. Lenders like to see that you have the ability to handle a down payment, and that you have assets that could help you get through some tough times if you needed to.

A solid financial foundation, with assets in your retirement account, savings account, and cash for a down payment, can show the lender that you are a good bet, since you manage your money in a way that doesn’t result in living paycheck to paycheck.

Plan now, at least six months before you plan to apply for a mortgage, and you will have a better shot at the best rates. Start planning more than a year ahead of time, and you will be well-positioned indeed.


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