Getting Approved For A Home Loan
Buying a new home is an exciting time. You dream of owning a home is nearly a reality and choosing the drapes and bath mats is all but a certainty. There is already a storage room full of wall decorations, kitchen accessories, rugs, etc. and all that is needed is a set of keys and a door to open them with.
However, if you have not secured a home loan, those brakes should be getting pumped heavily and fast. Many do not realize the amount of stress that goes along with buying a new home. The reason is simple, you only buy your first home once. From then on you know, at least to some extent what to expect. If you are buying that first home it will be exciting times; be ready for the fair share of stress as well. The stress factor can go way down if you all the ducks are in a row come mortgage loan time.
So, what are those underwriters looking for from you when that time comes? There is a combination of items underwriters look for/through to determine if a home is a good option for you at the moment.
Your Credit Score:
Your credit score will be one of the first things that makes or breaks your ability to move on with the process of getting approval for a home loan.
Your Credit History:
If you have kept good care of your credit since the beginning of your credit career things should go smoothly. Of course, all of the other items are factored in, but a good credit history definitely will not hurt the chances.
A good employment history with 2 years or more at the same current job.
Ability to Pay Off Loan:
Have all your bills have been paid on time ?
What you make versus what you owe is what determines your Debt-to-Income Ratio. Lenders want the number to be no higher than 36%. So, you should not owe more than 36% of what you earn a month.
Home Value vs. Price:
If you are purchasing a house with an estimated value of $250,000 and you are buying the home for $210,000, that is a good thing. If, however, the numbers are the other way around, bringing a good down payment into play will be a very, very good idea.
Most lenders prefer you to bring 20% of the purchase price to the table. Some banks will allow a smaller percentage and some will allow no down payment. Look at it this way though, the more you bring, the better your payments will be.
Likelihood to Pay Off Loan:
This one is simple, if the bills have been paid on schedule every month there will be no issues. That is basically how this category is looked at: Payment history.
All of those factors play into the underwriter's decision on whether or not to approve your home loan. Sometimes, they are willing to give a little in one area if you are very strong in another or if the down payment is a good percentage of the home price.