Here are four points to consider if you’re wondering whether you can qualify for a loan to purchase a home.

When I was 20 years old, my father asked me one day to get my bank book. Once I did, he told me I was buying a house. It scared the heck out of me, but he helped me understand four critical pieces of information that taught me I really could afford to buy a house. At the time, I didn’t have enough cash to buy, so I knew I needed a mortgage, and these four points were the criteria lenders used to determine whether I was qualified to buy—the same criteria used for buyers today.

So if you want to buy a house and aren’t sure whether you can get a loan, here are the four points to consider:

1. Income. Your income provides clarity on your ability to repay your loan. The lender will look at how much income you earn and how much you spend and calculate a ratio. If that ratio is a fit for the loan program, guess what? You get a loan! 

2. Credit. As with the previous point, your credit indicates your likelihood to repay the loan, and it’s all based on your past. Perhaps you’ve had some bumps in the road you need to correct, or perhaps you have a stellar credit history (which will work in your favor). In any case, most first-time homebuyers don’t have anything in their credit file, so it takes them a little time to build it up.

“Buying a home is easier than you think.”

3. The appraised value of the property you’re purchasing. This all boils down to the home’s value as determined by an appraiser. Between 80% and 90% of all buyers in today’s market have to obtain a mortgage, and their lender will require an appraisal for the property they’re buying to make sure they’re not paying too much for it. 

4. The cash you have. This means the lender will source the amount of money you have to ensure you have the right down payment, closing costs, and (sometimes) reserves in your bank account in case something happens and you no longer have a source of income. 

Remember—buying a home is easier than you think. If you have questions about this or any other real estate topic, don’t hesitate to reach out to me. I’d love to speak with you.