GETTING APPROVED FOR A MORTGAGE: WHAT LENDERS WANT TO SEE Looking for a new home is exciting, but before you get started it’s important to get pre-qualified to know how much house you can afford and to ensure that a lender will borrow you the money needed to purchase a home. To get pre-qualified you’ll need to fill out a mortgage application and provide documentation that supports the information on your application. The application will allow your lender to learn more about your unique situation. They will then be able to tell you whether or not you qualify to borrow, how much they will lend you and at what interest rate. While approval processes differ by institution, most mortgage lenders are looking at the same factors. How’s your credit? It’s probably no surprise that credit is one of the first things reviewed. Lenders will look at your track record of paying debts by examining your credit history and credit score. A credit score takes into account your payment history, the amount of available credit you’re utilizing, your length of credit history, and your pursuit of new credit and finally, the types of credit accounts you have. Your credit score will play a big role in what loan programs and interest rate you qualify to receive. Typically, borrowers with higher credit scores receive a lower interest rate. What is your capacity for debt? Lenders want to know what existing debt you have. Whether you have auto loans, student loans, personal loans, credit card debt, child support, spousal alimony or others, you’ll need to disclose your debt in the mortgage application. Mortgage lenders will then analyze your debt-toincome ratio, which compares how much you owe each month to how much you earn, to ensure you have the capacity to take on a monthly mortgage payment. How much will you put down? A down payment is the amount of money that you may need to pay up front to purchase your home. With today’s mortgage programs, you can purchase a home with very little down, as low as 3% for qualified borrowers. Additionally, there are loans backed by the federal government that do not require a down payment. Your lender will be able to review the different programs with you so that you know which programs you qualify for. Verifying Income, Employment and your Assets To verify you’ll have the funds to pay back your mortgage, lenders will need to see proof of income and your employment history. Typically, they’ll require a paystub along with two years of W-2 forms and full tax returns to determine if your income has remained steady. The same goes for employment history. Lenders will contact your current employer to verify that you still work there and to confirm your salary. They may also contact your previous employers if you’ve been at your current job for less than two years. When filling out the mortgage application, you’ll provide your current assets just as you did your debts. Your lender will ask you to submit statements from your financial institutions, to verify the amount you stated. It may seem like your lender is asking for a lot of information and proof of that information, but it makes sense given that you are about to make such a large purchase.
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HOME VENTURE October 2020
Lisa Thuner, is an Executive Mortgage Officer with The HOME Team at Town & Country Credit Union. To contact Lisa or get more information on home loans, visit www.townandcountry.org. Town & Country Credit Union is an Equal Housing Lender. NMLS# 704437. Don’t Make any Changes It’s important to note that after you submit an application any changes to the information you have submitted could jeopardize your loan approval. Lenders will ask that you don’t take on any new debt or open any new credit accounts. Also, if you can help it don’t change jobs or skip any payments. You want everything you submitted to your lender to be accurate and stay the same until you’ve purchased your home. Getting Started While the thought of having your finances analyzed can be overwhelming, fear not! Your local mortgage expert is here for you. Whether you have some work to do to improve your financial health prior to obtaining home financing or you’re ready to start house hunting with your pre-qualified amount, they’ll be with you every step of the way providing advice to ensure you feel confident making one of the biggest investments of your life. Set up a free consultation with a local mortgage officer today to get started.
