If you are seriously considering buying a house, you should apply for a mortgage, since this can give you a significant edge later on. If you are prequalified for a mortgage, then it acts as a signal to sellers and real estate agents that you are legitimate and a serious buyer. Many mortgage lenders consider a lot of factors while reviewing and before approving your home loan application. However, the basic thing that most mortgage lenders concern over is your ability to repay the amount.
Here we have compiled a list of the things that most mortgage lenders look for before approving a home loan.
- Your profession.
This is generally the first thing most mortgage lenders look for while reviewing applications. A steady and safe job is the first fulfilment to be eligible for a home loan. Lenders may even call your current and ex bosses to know more about your work and to see if you have written the correct salary. If you have been in and out of jobs for the last two to three years, or have been unemployed for a while, lenders may not approve your home loan.
- Your income.
This is the next thing mortgage lenders look for in your application. Just like your job, a steady income flow is more beneficial if you want your home loan to be approved. Lenders would need to go through your tax records to see proof of your income. In case you own a business, they would look at the adjusted gross income on your tax return to know if you are doing well.
- Your credit.
This is the most important thing about you that any lender will look into. Your credit score basically determines how equipped you are to be able to pay off the mortgage. The lowest interest rates are only given to those who have an excellent credit score and the lender is certain that they will be able to pay off the loan, while others are given higher rates. Your payment history is also reviewed by lenders, since this is an indication of how timely you have paid your debts in the past.
- Your outstanding debt.
The popular notion that you cannot be eligible for a mortgage if you have outstanding debt is not at all correct. Of course, it only adds to your merit if you do not have any debt, but that does not indicate that you cannot be eligible for a home loan if you have outstanding debts. Your impression definitely gets better if you owe less to your creditors. Your debt to income (DTI) ratio should be reasonable, you should not owe more than you can earn, and this is what lenders usually look at.
- The required downpayment.
This varies with different lenders, since some do not ask for any downpayment while others do. In case you do not pay enough downpayment, you can be asked to pay mortgage insurance by the lender, which acts as the security and protects the lender in case you are unable to repay the amount.
These are the usual factors taken into consideration by mortgage lenders before they advance your home loan request.