What Does It Take To Qualify For A Mortgage?
Do you need to apply for a mortgage to secure the financing for your home? If so, you may be wondering what it will take to qualify for a mortgage. If you are worried about having your loan denied, it helps to know what banks look for in their lenders.
Large Down Payment
A down payment shows a bank how good you are with managing your money. If you have very little saved up for a down payment and you want to buy a home, it shows that you are having trouble saving money. This can bring up the question about how you would pay for an emergency home expense, or make your monthly mortgage payment in the future. A payment as large as 20% of the home's value shows that you are responsible with money and can save it.
It's one thing to have a job where you are paid well enough to cover your mortgage payment. However, mortgage lenders look at how long you've been employed and how often you change jobs. If you are the type of person who switches jobs frequently, that is not a good sign for your mortgage. The bank may view this as a risky behavior if it is only your name on the loan.
Your credit history will be looked at in great detail by the underwriters at the mortgage lender. For example, they are going to look at things such as how much of your credit you utilize at any given time, which is known as credit utilization. Using a fairly low percentage of your credit that you have on credit cards demonstrates that you have self control with borrowing power and do not max out your credit cards. This is looked at favorably since it shows you are responsible with credit when it's given to you.
The home that you buy also plays a big part in being approved for the home. Since the property will be turned over to the bank if you cannot make your mortgage payment, they want a property that is worth what you paid for it. A bank will use an appraiser to determine if the home is close to the offer price that was accepted. The market usually figures itself out when determining home value based on supply and demand, but a loan will be denied if you are drastically overpaying for a home that is not worth its offer price.
Learn more about mortgage loan programs near you today.