With all the complexity surrounding home loans, it is helpful to understand what a bank looks at while approving your loan. There are 4 key elements to a mortgage approval.
Your credit report helps a bank determine how likely you are to repay your home loan. In addition, if the credit report does not have a long history, the bank may ask for additional verification to show a positive credit history. Through reviewing your credit report, a lender can determine quickly if you are pre-qualified to purchase a home. The credit score is a numerical representation of how likely you are to repay your loan. However, don’t get to hung up on your credit score alone. Our Plattsburgh mortgage representatives have decades of experience helping home buyers with less than perfect credit. Our mortgage professionals will offer guidance, tips, and tricks to boost your credit score. With a long term credit repair plan in place you can be confident home ownership will be possible.
Income is extremely important to show that you have the ability to repay a home loan. The amount of income you receive is important but also the length of time on your current job, regularity of income, history of hours worked, and even average bonus or commissions are reviewed in detail. Although you can purchase a home with a new job it is important to note what the guaranteed income amount is. If you are not sure how many hours of overtime you will work or how much commission you will receive, it cannot be used to qualify for a home loan. Providing income documentation (paystubs, tax returns, etc…) Is the first step in becoming pre-approved. Check out our post about the differences between pre-qualification and preapproval.
Depending on the loan program you select, you may need to have a down payment. It is important to show that you have enough money available to close on your home purchase. In addition, some programs require that you have reserves in the bank. Reserves represents how much money you will have after you close on your home. Reserves can help strengthen your profile by showing that if you were to become I’ll or lose income, you would still be able to make payments for some time. Assets are the second step in becoming pre-approved. Some of the documentation needed includes bank statements, retirement account statements, and any investment accounts you have.
The property is last step to getting approved for a home loan. Although you may qualify for the mortgage, an appraisal is needed to determine if the property meets or exceeds the sales price. Let’s assume that you are purchasing a home for $150,000 with our USDA no money down home loan. USDA allows for 100% financing. If the value of the home is $140,000, than 100% financing is now $140,000. Although you have a no money down home loan, you would still need $10,000 to purchase the house because the sales price is $150,000. In the rare instance this issue pops up, sellers and buyers typically negotiate new terms. It is the sellers right, however, to stand firm on the sales price. In some cases a buyer simply moves on to find another home.
BOE Mortgage Plattsburgh is a mortgage bank with decades of experience in helping people become home owners. A home may be the biggest asset purchase of your lifetime. Make sure you work with a mortgage company that has the knowledge, service, and loan products available to make your home purchase a smooth process. Call Bank of England Mortgage today at 518-324-5544 or Click here to receive more information about the mortgage process.