[3] What do Lenders look at when you apply for a home loan?

By Ed Westerman, Broker
Country Lifestyle Realty, L.L.C.
417-844-2626
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Your Credit: Are you a good risk?

In today’s loan world, lenders will review your current credit report which shows your credit records past and present. The Lenders will look at all your payment history showing any current as well as delinquent payments. They will examine past dues carefully. Some items stay in your records from seven to ten years. Your past record, as well as your current credit score, will be used by the Lender determine what they might expect from you in the future.

Your potential mortgage lender must decide if you are “a reliable” borrower and likely to make payments on time. They will be looking at several different aspects of your finances beginning with your credit score and your credit history.

Your Debt; past & present

While a credit score of 640 is low by some standards, it is considered acceptable by many lenders. Specific requirements will differ from lender to lender.

Every time your debt is satisfactorily paid off, it adds to your credit score positively. The number of present active credit lines will also be considered. A person with two or more credit lines used regularly and kept paid on time and current can be a real plus for boosting your score.

Your future debt

Lenders will add their loan payment estimates to your current debt payments. You must be able to show all your current debts. They will be looking for debts on automobiles, credit cards, loans of any kind, including student loans, alimony, child support, and even the IRS.

If your existing credit line payments plus the bank loan payment is too great; you might be turned down. Your current debt balances can lower the amount of money a bank is willing to loan you.

What ever you do, don’t try to hide anything from your banker and don’t leave anything on your application unanswered.

Your Verifiable Income

Of course, lenders will want to know exactly how much money you make to be sure you can make payments each month. Lender will use their specific formula to determine the maximum loan amount they will consider. Usually your combined debt payments (including the new house payment) cannot exceed a certain percentage of one’s gross monthly income. Ask your current “lender to be” what their requirements are.
Lenders generally require a minimum 2 year work history in your current career field. If you must change jobs remember, lenders will look favorably when it is with the same company or in the same type work that is in your career field such as sales, auto mechanic and so forth.

Your realtor can help you obtain this type information, just ask.

Your Assets

Your assets will be looked at by a potential lender. Equity in real estate or personal property plus cash in your bank account will be considered. You will need enough cash to pay down payment (when required) and your share of closing costs. If you have someone helping you, any cash must be a gift not a loan.

You will likely be required to have a minimum amount in savings and in checking. The lender and/or type of loan can affect your cash requirement. Your lender can provide information on these requirements. Ask your agent to help find a Lender that fits your needs.

In Summary

It is possible to have too much available credit but not have the ability to make your mortgage payment. Sometimes a lender will lower the amount they are willing to lend a particular client because of repayment ability.

Remember, should you be turned down, you may find another lender willing to work with you.
Feel free to contact me. I have many years experience in representing clients with various credit and their dealings with lenders.

Ed Westerman
Text or call me @ 417-844-2626

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