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What Does It Really Take to Be a Homeowner?

The American dream is to be a homeowner. It is such an exciting adventure, but very stressful. Many people start their journey with questions like, “How much can I afford?” or “Is my credit good enough?” or “Where do I begin?”. The process can be overwhelming. They then start thinking about home improvement loans and whether they’ll need to get one to fix things up before they can move in. Let’s take a look at what you can expect during this process.


Knowing your credit is the first step. Your credit score is probably the most important factors in getting approval for the loan. Most conventional loans require a credit score or 620-640. There are lenders that will approve you with a 580-credit score. The lower your score, the higher your interest rate. If you have poor credit, it is important to try to improve it as much as possible before you start the loan process. A few points can save you thousands of the course of the loan. Not to mention, if you are near the cutoff for your credit score, it may even cause you to get denied.

Down Payment

Many mortgage companies will require a down payment. Be prepared for this. This is an important question that should be one of your first questions. Down payments range from 5%-20%. If your mortgage company asks for 20% down and the home you want costs $200,000 you could be on the line for $40,000 plus closing costs. VA loans do not require a down payment. Speak with your mortgage company to see if they require one anyway. USDA Loans are a popular choice now because they do not require a down payment. That is a huge reason why so many people are choosing that type of loan.

Documents That Your Lender Will Need

  1. A completed application.
  2. Two forms of ID like your driver’s license and social security card. They will need proof of your identity.
  3. Pay stubs/W2 for up to two years and tax returns. Your lender will need proof that you made the amount that you said you did.
  4. Name and contact information of your employer. Again, they want to verify your employment.
  5. Bank statements for 2-3 months of your checking and savings accounts. They will want to see how much you are spending each month. If your account has been in overdraft, even once, it can cause the application to be denied.
  6. Information on any of your debt including car loans, personal loans, credit cards, and student loans. This debt affects your debt to income ratio. The lender will want to know that you have enough money to cover your debts.

Depending on your type of loan and lender, they may need more documents, but these are the most common that are required.

Your credit, income, and proof of your identity and income are the biggest factors that will make or break your loan. Low credit is the most important. If your credit is a 400, it doesn’t matter your income because most lenders won’t continue a discussion with you. Know your credit range and gather your documents before contacting a lender. Remember, if there is a way to improve your credit, even a little, do it first.

Written By

Ryan Kh is a big data and analytic expert, marketing digital products on Amazon's Envato. He is not just passionate about latest buzz and tech stuff but in fact he's totally into it. Follow Ryan’s daily posts on WordPress / Clear World Finance / Forumsmix

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