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5 Things to Prepare for When Applying For a Mortgage The first and most important thing your lender is going to want to know is your income level. They won’t
even consider you if you don’t meet their minimum requirements.
Every lender’s minimum requirements are different as they set many of these themselves. At a general
level though, the following is what they will likely be looking for.
Lender Requirements They will want to see that if they were to give you the loan, your fixed monthly housing expenses would
not exceed more than about 28% of your total income. That percentage varies from lender to lender,
and the final decision isn’t solely based on it.
It holds great sway in your approval rating. For that
reason, you will want to carefully plan the price of
the house you are planning to purchase.
Second, payment history is another huge
consideration to getting a loan approved. Your
payment history is essentially your credit score.
Lenders are going to want to know what your past
payment histories have been to determine how
trustworthy you are. You have a credit score to help
them quantify your trustworthiness.
If you have had trouble making your payments on time, or indeed making them at all, then your lender
needs to know about it. They will be expecting similar behavior from you for a several hundred thousand
dollar loan.
If your credit score is good, than you won’t have anything to worry about. If your credit is scarred, your
chances for qualifying for a mortgage will drop significantly.
Even if you do qualify, you will get a high interest rate. If you have bad credit, it is often better to fix that
before you apply for a mortgage.
The nice thing about VA loans is that they offer a bit more flexibility where this is concerned. They won’t
deny a loan solely based on a low credit score.
Financial Assets Third, financial assets are another consideration for your lender. Financial assets include how much
money you have in the bank, current market value of investments, face value of life insurance policies,
etc.
This is essentially an idea of how much money you have in property and investments that could be
either (1) sold to help pay off the mortgage, or (2) cashed in to help pay off a mortgage in the event of
non-payment. Obviously if you have a couple hundred thousand dollar investments, a lender is going to
feel much better about lending you money than if you had nothing.
Be prepared to find the current value of those assets and present them to
your lender. They could help you get the loan faster and with a lower interest
rate.
Fourth, you will be required to produce a down payment. 20% of the house
value is a typical down payment price.
Prepare to apply for a loan by saving up about 20% of your home. VA loans are
nice in this area as they are not required to qualify for financial aid.
Fifth and finally, avoid planning on a refinance for now. Although it can help you down the road, apply
for a loan that you can foreseeably pay off according to the terms given.
Relying on a refinance to make ends meet in the future is a risky venture since you have no guarantee it
will happen. This is the same with VA loans so be careful with the mortgages you sign into.
These five tips will help you prepare to qualify for a mortgage. The better prepared you are, the better
your situation will be in the eyes of the lender and the more likely you will be to get the loan you need.
Photo Credit: Ayla87, TALUDA