Are you ready to start the application process for a mortgage so that you can purchase a home? If so, know that approval is not always guaranteed. A mortgage lender will consider the following factors before they approve your mortgage.
Your Credit History
Your credit report is going to be pulled so that the lender can look at your credit history. They are going to be looking for things like if you owe a lot of debt, have court judgments against you, and your overall credit utilization. They want to make sure that you are responsible with money and are likely to pay back the loan based on your previous history of borrowing money.
You will need to show proof of income so that the lender knows that you can afford the home that you want to buy. This involves submitting pay stubs, old tax returns, and anything else you may have that shows much much money you make.
In addition, the lender is going to look at your credit history and income to determine your debt-to-income ratio. This is essentially how much of your monthly income goes toward paying debts. If your debt-to-income ratio is too high then you may not be approved for a loan.
Your Down Payment
The amount of money that you provide for a down payment has an impact on your mortgage in a couple of ways. It lowers the amount of money that you need to borrow for the home, with a large down payment making your loan less of a financial risk. You already have equity in the home, so you have more to lose by defaulting on the mortgage in the near future. A large down payment also shows that you are capable of saving the money for the down payment, which can demonstrate that you are responsible.
Your Potential Home
A lender will want to know details about the home you are buying to see that it is a good investment. This includes making sure that it is a fair price at the appropriate market value and that the home is in good condition. This is because the home will become the property of the lender if you default on the mortgage, and they will need to recuperate their losses by selling the home. A lender will be less likely to approve a home mortgage if the property needs a significant amount of work.
For more information, contact a mortgage broker near you.Share