The Importance of Credit & Income When Buying a Home

When you start the process of purchasing a home, as your mortgage lender, we will look at two things to determine the size and stipulations of your home loan: your credit score and income. While many other factors may go into your loan approval, these are perhaps the two most important elements.

Credit Score Methods and Details

What is a credit score? Your credit score is the result of a formula that indicates how likely you are to repay your loan on time, and in full over the loan term. Simply put, lenders and other financial organizations use it to determine how risky it is to lend money to a certain individual. Transunion, Experian and Equifax are the three primary credit bureaus that keep and calculate your score on a scale of 300 to 850.

Your interest rate, payment schedule and type of loan you qualify for will be heavily dependent on your credit score. However, you can qualify for a myriad of loans without perfect credit. In fact, many of our loan programs will take into account other factors like your established income.

Sources of Income

To determine your financing eligibility, we look closely at your income and assets to determine what is called your loan-to-value (LTV) ratio. Income naturally includes any salary you receive, but it also entails:

  • Commissions and bonuses
  • Part-time employment
  • Child and/or spousal support
  • Dividends or interest payments
  • Self employed income
  • Rental revenue
  • Income from Social Security, retirement and pensions

 With each income type, you will have to provide documentation including W-2s, canceled checks, bank statements, pay stubs, 1099R, 1040s, etc. Throughout the mortgage process, we will help you understand all loan options and how they work with your income and credit score.