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- 1). Collect all documents related to your income. This includes not only your pay stubs, W-2s and tax returns, but also any documents related to nontraditional income, like Social Security, Social Security disability, unemployment and any under-the-table income. You will need these documents to calculate your eligibility.
- 2). Pull your credit report at Annual Credit Report. This is a federally mandated website dedicated to providing free credit reports for American consumers. You can get a copy of each of your reports from all three credit bureaus, TransUnion, Experian and Equifax.
- 3). Calculate your debt to income ratio (DIR). To calculate, divide the sum of all monthly expenses by your total gross monthly income. Multiply this figure by 100. Most mortgage lenders will not offer mortgages to customers with DIRs higher than 45 percent.
- 4). Calculate your disposable income (DI). To do this, simply subtract the sum of all monthly expenses from your total net monthly income. Most lenders want to see DI of at least $500. In addition, if you have any children, mortgage lenders often want to see at least an additional $100 in disposable income per child.
- 5). Print out your credit report(s). Look for any negative marks, such as liens, judgments, public records, excessive inquiries (more than six in a six-month period), late payments (over 30 days overdue) and accounts in collections. All of this will hurt your eligibility for a mortgage.
- 6). Calculate your down payment. If you plan on making a large down payment, you will likely be far more eligible for a variety of mortgage options. Mortgages that are close to 100 percent loan to value (LTV) are riskier, and therefore fewer lenders will be willing to finance your mortgage loan.
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