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What Are Lenders Looking At When Applying For A Mortgage

Nov 28, 2007
When you are applying for a mortgage, there are a lot of different details that lenders are looking at. It can sometimes be overwhelming and confusing, but as long as you are doing your part, you should be able to collect everything you need and get it in order.

The primary thing that lenders look for is your job history. Two years of steady income from the same employer is what most lenders like to see. Any breaks in employment should be explained in detail. If you do not have a steady, two year history, you will still be able to get a loan, but the interest rates will most likely be higher. This history will be able to show your stability. They want to make sure that you can make consistent, steady, regualr payments monthly. If you are not employed currently, it might not be the best time to shop for a mortgage.

Your income versus debt ratio is another factor . Having debt from school loans, cars loans or credit cards is not a large issue as long as they are under control. The monthly payments for these debts must be atleast 41% or less than your monthly income. This is normal for most people, but lenders are just trying to see if all payments are under control.

Lenders also want to see whether or not you can make a down payment. Making a large down payment is one of the best ideas when it comes to mortgages. A 20% down payment of the loan is general asked for, but not all require it. Some will only require a 5% or 10% down payment. These percentages are based on the amount of the loan. If you can pay a larger portion, it is always smarter to do so.

Credit history is ne of the most important things that lenders look. The fico score, which is a number generated by computers, can tell lenders a lot about your credit history. Between 500 and 800 is generally where you want to be. If your credit score is not in that range, you can still be approved for a mortgage but may be a little bit more difficult. If your score is lower than 500, than hopefully you have strong points that will help outweigh the lower fico score.

Reserve is another common term that may be a bit confusing. A reserve of one months mortgage payment is something lenders will want to see also. Occasionally, lenders will require two to six months reserves, but it depends on the financial institution. Reserves are a great way to show lenders that you are serious about what you are doing.

Lenders are looking at many different factors when it comes to applying for a mortgage. Each factor is different for each lender and loan officer. Make sure that you check out many different options and look at the different factors that each lender will be looking at. Do research and dont be afraid to shop around a bit before finding the mortgage that fits you best.
About the Author
Court provides information about unsecured personal loans and teaches people how to pay off private student loans.
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