After ascertaining that it is time for you and your family to get a new home, mortgage lenders will always be ready for you if you consider their help. There are many lenders with different types of mortgage loan options, including jumbo financing, FHA, and VA loans, that you should check out but first, how do you qualify for mortgage financing? Here are four critical determinants, like farmers bank mortgage rates, that are often scrutinized by all lenders before approving the loan applicants.
The past payment history of an individual will play a major role in determining their credit score. You must, as such, check your credit score and correct or update your credit report before submitting it to your potential mortgage lenders. When you consider a mortgage loan while having a low credit score, you might pay more for their mortgages. An ideal approach would be to improve your score by taking care of your bills and debts on time for a better credit reputation. Lenders trust people with great credit scores to repay their loans as per the agreed terms, unlike those with a poor history with their debt clearance.
The cumulative amount of debts you have against the income you make determines your DTI. Supposing you have a lot of debts and small income, consider checking out the small and affordable homes that will not affect your financial stability to pay. The other ideal option would be to clear your debts on time before going to ask for a mortgage loan for you to access the best homes you had envisioned. Paying your bills and debts on time also improves the likelihood of a great credit score.
Initial Down Payment Value
As a self-protection move, lenders encourage homeowners to pay a substantial amount of deposit or initial installment. This helps them get back their money faster while increasing their home equity. Loan defaulters often cause losses to their mortgage lenders due to factors like selling fees for the home and the likelihood of a reduction in value over the years. It is advisable to consider up to 20% of the total home value as your initial deposit and take the 80% as a loan to be repaid gradually. You are also allowed to pay more than 20% if you can to enjoy reduced monthly repayments and a shorter paying period.
Your Work History
Without proof of employment, how will the lender be assured of your ability to manage the repayment plan comfortably? All lenders will need you to provide proof of at least two years of employment and stable income. Even if you lack an employer, the lender will still need you to prove your source of income for the stated duration before you are eligible for the mortgage loan you are asking for. It should also be said that changing jobs is not advised once you get the mortgage loan until you have closed down on your mortgage repayment.