There are several key factors involved qualifying for a home loan.
Income. When qualifying for a loan, lenders customarily use your gross income to determine the monthly mortgage payment you can afford. Gross income may also include the average of overtime, commission, and bonus pay. You may also include child support and/or alimony, if you wish to have them considered and can show a history of receipt as well as proof of continuance.
Proposed Home payment to Income Ratio. In general, lenders require that your total monthly mortgage payment be no more than 40% of your monthly gross income. Your monthly mortgage payment should include principal, interest, property taxes, mortgage insurance (if applicable), hazard insurance and any homeowner association dues.
Total Debt to Income. You may have car loans, student loans, credit cards, child support, alimony or other monthly expenses. In general, lenders require that the total of all your monthly expenses (excluding basics like utilities and groceries) not exceed 45% of your gross monthly income.
Credit history. A satisfactory record of paying your bills on time is an important part of getting a home loan. If you've had recent credit difficulties a good explanation of any late or missing payments on your credit report will be taken into consideration.
Employment history. Lenders usually prefer to lend money to people whose incomes have remained consistent over the past two years and who have worked consistently in the same or related occupations. If you're self-employed, work on commission or have been at your job less than two years, you may need to provide additional information about your work history. If you have been in school, the lender would need school transcripts.
Property appraisal. A professional appraisal from a third party is done to determine the value of the home. An appraisal is based on the home itself and selling prices of comparable properties in the area. The purpose of the appraisal is to certify the value of the home and to confirm the value is greater or equal to the purchase price.
Everyone that we worked with at NVR was very helpful and took the time to make sure we understood every aspect of the process.