By David Weliver

What does it take to get a mortgage? Yes, you need a good credit score, but here we look at what else you need before you apply for a home loan. Usually, this includes a job and a reliable income history that can be verified by at least two years of tax returns.

There’s no question, it’s a good time to get a mortgage.
Average rates on 30-year fixed-rate loans are around or under 3.5 percent, according to Although a couple years ago when 30-year mortgage rates were around 4 or 5 percent, we all figured they couldn’t fall much further…here we are. So although interest rates alone are not a good reason to buy a home (you have to wait until you’re ready).

If you are ready to buy a home, however, it may be savvy to peruse the mortgage information resource center, and act quickly to take advantage of the great lending rates.

Financial requirements for mortgage approval

Although lenders are increasingly willing to extend credit, the standards to get approved for a mortgage are high. Excluding FHA loans and some other special loan types, this is what you’ll need to get approved for your mortgage fast.

Great credit

This shouldn’t be a surprise. When it comes to getting a mortgage, your credit score matters. Although you may get approved for a mortgage with a score in the 600s, a score of 720 or higher will get you the best rates and save you, quite literally, tens of thousands of dollars over your lifetime.

(Don’t know your credit score? Take a look now with CreditKarma (it’s really free).)

Money down

Gone are the days of the no-money down loan. Besides, you’re smarter than that. In my opinion, the smart way to buy a home is the old-fashioned way: With at least 20 percent down. You may be able to get an FHA loan requiring as little as 3.5 percent down or another unconventional loan with a reduced down payment, but considering money you’ll pay in private mortgage insurance, it may be smarter to wait until you have a bigger down payment…even if mortgage rates creep up in that time.

Cash on hand

Aside from the down payment, banks want to see that buying a home isn’t going to drain your account. And it’s good form to have an emergency fund leftover after all the closing costs (and moving expenses) are paid.

Solid employment

Next to your credit score, this is most important. The longer you’ve been at your job, the better. If you’re self-employed, prepare for a minor battle to get approved for your mortgage: Most lenders will want to see at least two years of tax returns and will figure your income as an average over the last two years which could potentially reduce the amount of financing for which you can qualify.

Records required for mortgage approval

Before you apply for a mortgage (for a new home purchase or a refinance), you’ll need to gather the following documents:

Social Security numbers and birthdates for all borrowers
24-month residence history
24-month employment history (need name, number and address of employer)
Copies of pay stubs for last 60 days
Copies of W-2 forms for last two years
Bank statements and investment statements for last two or three months
Evidence of homeowner’s insurance
Address of the property you are purchasing or refinancing
Purchase agreement (new home) or title documentation (refinance)
If you are self-employed, copies of tax returns for the last two years

How to comparison shop for mortgages

Start by calling one or two local banks or credit unions and asking for a good faith estimate (GFE). The banks won’t charge a full application fee for this part of the application but may charge a credit inquiry fee of between $15 and $50, so be sure to ask. For comparison, you can also get several free mortgage quotes online fairly quickly.

If you need additional help finding a suitable loan and rate, a mortgage broker may be able to help (mortgage brokers can shop your application around to dozens of banks to get the best rate). Ask friends and neighbors for referrals to a good mortgage broker.

When you compare your estimates, don’t forget to factor closing costs into the final cost of your mortgage. Banks may low-ball closing costs when providing an estimate and then slam more on you when you’re in the final throes of closing and eager to get it over with. If a lender has a lower rate but higher closing costs, go back and negotiate. Always ask!