Are you thinking of buying a home? Buying a house can be both stressful and exciting, you have a lot of things to do and consider before attending an open house.
Before starting the process of looking for a house, it is to your advantage if you get prequalified for a mortgage. This will not only provide you with a buying edge, but it also serves as a good sign to any real estate agent or potential seller that you are serious about purchasing a home.
When it comes to the process of home financing, this will serve as your dry run. Despite being nonbinding, it will provide you with the idea of what kind of house you can buy given your budget and financial state. Aside from that, it also helps you prepare for an application of an official mortgage loan.
It can be hard to know what Houston mortgage lenders look for when they review your application for a home loan, but they generally are concerned about the same stuff. What’s that? You can repay any of your home loans.
In this article, we are going to discuss the things that lenders are looking for when reviewing your home loan application.
When it comes to your credit cards, you don’t have to have a zero balance to be qualified for any home loan. But, it is best that you decrease your debt. The lesser you owe the creditors, the better. Mortgage lenders use the debt-to-income ratio or sometimes called DTI ratio to check the money you earn to the money you owe. This helps ensure that you will not overextend with any of your new mortgage payments. The DTI limit varies depending on your loan program. In most cases, they offer a 43% to 50% DTI.
If you want to calculate your own, total all of the monthly debt payments that you have and then divide these to your monthly income, but make sure that it’s your gross income.
Time and again, you might have heard that credit score has an impact on the amount of loan and the approval of any home loan that you are planning for: the higher your credit score, the lower interest rate you can have.
Lenders always ask for any proof of income. Using two years of tax information, they can see if you have a steady, increasing or dropping salary.
Aside from the income, lenders also check your employment history. If you don’t have any steady work for the past two years, you might have a significant impact on your eligibility to get a home loan.
Sometimes, mortgage lenders ask for your investment and bank account statements for the last two months. This makes sure that the money you are claiming is there. They will check if it has been there for many months and check any cash reserve.
A down payment can be considered as an investment when it comes to the equity of your home. Some mortgage programs will provide you with a more favorable financing option if you give a down payment. But you are not required at all. It is up to you.