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Getting Started

One of the most important steps in buying a home is getting financing. There are several factors that can effect your mortgage application so it is advisable to call our Brokers to discuss your intentions, review your financial status, and together develop a plan to accomplish those goals and prevent the possibility of being denied. Here you will learn some basics about the loan options that are available and have the opportunity to ask questions. Lenders want to see an applicant who is credit worthy and can show ability to repay. It is important to understand what factors will hurt time of the application. Your credit profile greatly impacts your ability to qualify so it is a good idea to have your credit pulled at this point. If any derogatory accounts, errors or inaccuracies are reporting on your credit, this is the time to get those corrected. Although lenders conform to standards set by government agencies, loan approval guidelines vary depending on the terms of each loan. In general, approval is based on two factors: the value of the property and your ability and willingness to repay the loan.

Your FICO Score and Credit Report

Your credit report and FICO score provides information to those who are seeking to obtain a loan. Credit history carries a huge weight in an Underwriting decision. Fair Isaac and Company (FICO) developed a system using mathematical models that present the credit risk of an individual in comparison to that of the general population. It is a quantified measure of the credit worthiness of an individual based on a number of factors including past payment history, total number of outstanding balances, length of credit history, number Your credit report isa good indicator of the likelihood that you will repay the mortgage you of new credit inquiries, and type of credit established. These scores are used by nearly every Lender in their credit decision. If you don’t  have a good credit score, you won’t qualify for a conventional mortgage, leaving you with only sub-prime of hard money options. These loans are costly with higher interest rates. It is crucial to know your score before you apply. This gives you time to fix any problems on your report. If your score is low, a few months can make all of the difference. Paying down credit card balances before applying for your mortgage accounts for about thirty percent of you credit score. Lowering your monthly debt lowers your debt-to-limit (DTI) ratio, giving strength to your application. It also allows you to apply for a larger mortgage. The number of credit inquiries reported could create an adverse risk factor which may result in higher costs or a higher interest rate. Therefore, it is important to be cautious of the number of reports you authorize while comparing lenders. Pay all your creditors on time and wait to open any new credit accounts.

Income/Employment Check

Industry guidelines are used to calculate your average monthly income versus your debts, otherwise known as your debt-to-income (DTI) ratio. A strong employment history shows stability and proves you have the means to repay the loan. Most lenders want to see that you have been with the same employer for two years or longer. It is also important to have been in the same field of work for two years. Once you have applied for the loan, you may not change jobs before closing. If you lose your job or take a new job, your loan will likely be denied. At closing, you will be asked for proof of employment, like a recent pay stub or possibly a call to your employer.

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Asset Evaluation

By saving a hefty down payment for your new home, you are a lesser risk to the lender. It gives instant equity to the home. It also proves financial responsibility by showing your ability to save. Borrowers must verify that they have the funds to close. Lenders expect borrowers to come up with sufficient cash for the down payment and other fees payable by the borrower at the time of funding the loan. It is generally expected that these funds be borrower’s own saving, although a borrower may receive non-returnable gifts towards down payment and other loan fees. You no longer need 20 percent in order toqualify for a mortgage. However, if you don’t put down twenty percent, you will likely pay for private mortgage insurance. Many lenders require only 3.5 or 5 percent down payments. Ifyou have good credit, you can get by with a small down payment. If your credit is poor, youwill have to put more money down. Some borrowers who have poor credit choose to use ahard money lender. Hard money mortgages require as much as 35 percent down. Theseare not commonly used, but the typically high interest rates on these loans shows the importance of good credit if you don’t have the necessary funds for a down payment.

If your feel ready please go to our Loan Application page

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