Qualifying for a mortgage – The Process.

When you borrow money from the bank to buy a house, the bank wants to make sure you’re going to pay them back. This process is called qualifying for a mortgage. Sure, if you don’t pay, they could foreclose on the house and sell it to someone else. But they’re too busy counting all the dollar bills they’re making on everyone else’s loans to worry about patching up and reselling your house–they prefer for you just pay them back like you said you would.

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You, too, want the bank to feel like you’re good for the money. As we discuss in this article about what affects your mortgage payment, if the bank likes you as a borrower, you’ll get a lower interest rate, thus a lower monthly payment. And you’ll spend less money for the same house over the life of the loan. Possibly much less.

Qualifying for a Mortgage

There are a number of things the bank looks at to determine how easily you can afford to pay them back:

Your income

If you make a ton of money, you probably have plenty of cash to make your mortgage payment. The bank will require proof of income, generally paycheck stubs and bank statements, to be considered for a loan.

Your debt

Even folks who make a lot of money don’t have much left over for a house if they’re blowing it all on other loans for things like cars, yachts, and shopping. If a large amount of your income is already going to paying existing loans, you’ve got much less left over to make good on this new mortgage.

Your job

If you have a very risky job that might pay you well now but could disappear at any time, you look risky. Also, if you work seasonally or are self-employed, you’ll need to do some extra convincing to get a mortgage.

Your credit history

Perhaps the single most telling indicator as to whether you’ll make your mortgage payments is how well you’ve made good on debts in the past. For decades, lenders have been helping each other verify potential debtors by keeping tabs on who borrows–and pays back–what. They share this information with the help of third-party agencies known as credit bureaus, and when you want to borrow more, the lenders will go right back to the credit bureaus for an update on your debt-paying habits.

What happens if you have negative information on your credit report?

There are three primary credit bureaus in the U.S., Equifax, Experian, and TransUnion. These groups aggregate your payment history on a regular basis; when a lender gives you a new loan, whether it’s a credit card, a car payment, a line-of-credit, or any other amount of money you need to pay back, they’ll notify the credit bureaus that this loan has been opened. If you make payments each month as promised, your record for that loan will stay clean. If you fail to make a payment, the lender will notify the credit bureau, and it will tarnish your record for years to come.

So do I qualify?

Qualifying for a loan means that a lender is willing or able to give you a mortgage because your information indicates you’ll pay it back.

As for who qualifies, every lender is different. They all have rules for lending based on their tolerance for risk, federal law, and their own experience with borrowers. When you apply for a loan, you’ll first meet with a loan originator, also called a loan officer. That individual will consider the amount of money you’re requesting, and help identify the various aspects of your financial standing as described above. They’ll obtain your FICO score, and will quickly be able to tell you how likely you are to qualify and what your interest rate will be.

Ask a loan officer if you qualify for a mortgage.

If you meet the general criteria, the originator will turn your case over to an underwriter. An underwriter is a skilled analyst who compares your information to some very specific, complex lending rules. Sometimes the originator believes a person will qualify, but when the underwriter looks more closely, it turns out they don’t. This could be for a variety of reasons, including the borrower’s income, credit history, existing financial obligations, legal status, age, and many other factors. It’s also possible that the underwriter will approve you but will require a different interest rate than the loan officer had initially predicted. This is normal and in most cases, shouldn’t be seen as a bait-and-switch, unless the difference is huge.

Qualifying for a MortgageOnce the underwriter has approved you for a loan, you can basically buy the house you want, as long as you aren’t buying something that costs a lot more than the real market value.

Getting pre-qualified

When you make an offer on a home, there may be other people trying to buy the same house. From the seller’s point of view, they don’t want to accept someone’s offer and watch the other potential buyers go off and find something else, only to discover later that the buyers they accepted can’t even qualify for a loan. One way to improve your chances of having your offer accepted is to offer more money. But another great way is to get pre-qualified. That means you have a bank inspect your credit-worthiness before you start shopping. They’ll give you a letter saying that they’ll be willing to lend you up to a certain amount of money when you find the house you want. Sellers will be more willing to accept your offer if it looks like you can actually make good on it, because not everyone can. They want a swift, smooth transaction, and the healthier your financial situation, the smoother you can make it for them.

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844-ROOKIE-1 (844-766-5431)
AMCAP Mortgage LTD. – NMLS# 129122
16000 Stuebner Airline, Suite 285 Spring, TX 77379
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