HOME BUYING 101 - ARE YOU READY?

QUALIFYING FOR A HOME LOAN

When applying for a home loan, lenders look at a variety of factors before deciding your qualifications. Such as:

Employment history and how long you have been at your current job.

Most lenders are very strict when it comes to employment. Most lenders prefer buyers whom have steady employment history and at the least, two years at their current position. Employment plays an enormous factor in determining your ability to pay your mortgage. Lenders also use your employment to determine how much they are willing to lend to you.

Credit history and/or FICO Score With your permission, lenders will request a copy of your credit report from the three major credit bureaus. Your credit is probably the most important factor to lenders. Lenders will view your credit to determine which loan programs you are qualify for.   Your credit report will let lenders know how responsible you are with paying your debts. They will view your credit report for unpaid collections and past due accounts. If your credit report list unpaid collection or past due accounts, your lender will request for you to pay the accounts or deny your request for a home loan. Some lenders determine the loan programs you qualify for based on your FICO score. Normally, they will request your score from each of the credit bureaus. Based on the three scores, either the highest of the three or the medium of the three will be used to determine your eligibility.   Current Debt Most lenders will view your current debt as a negative. If you have a significant amount of debt, you will likely qualify for a reduced loan amount. Most lenders prefer your debt to be less than 30% of your income, including your mortgage.   It is important to remember every lender is different. You may not meet all factors and some you may out shine than others. Research lenders in your area and find a lender whom you feel will meet your needs. You should always verify the reputation of a lender before choosing one. There are lenders who specialize in working with individuals with poor credit; also, there are lenders who specialize in working with individuals with superb credit. If you have outstanding credit, your options of lenders will be broad; however, carefully choose a lender.       Back to more mortgage and real estate information     To teach and learn money skills, personal finance, money management, business, careers, and life skills please go to the Money Instructor home page.