Applying for a mortgage can be an incredibly stressful process. However, one of the things that can reduce the stress associated with it is fully understanding what kinds of circumstances will affect whether or not you ultimately qualify for a loan and at what interest rate. Indeed, this process is relatively in-depth, and there are a variety of factors that go into determining whether or not you qualify for a mortgage loan. Here is a look at three such factors.
Your credit score is the closest thing to an overall, cumulative credit history that lenders have available. A high credit score indicates a variety of positive credit-related factors, including a lack of delinquencies, positive payment history, a low debt-to-income ratio, and more. Lenders are far more likely to offer loans to individuals with high credit scores than to people with low ones. You should find out if qualitative and environmental factors apply to CECL, which stands for Current Expected Credit Losses. This relatively new change in accounting standard may have an impact on your mortgage.
How much income you and any other mortgage applicants make is key to ultimately determining whether or not you qualify for a mortgage loan. This is for obvious reasons - a mortgage holder will want to make sure that you will be able to afford your mortgage payments. On a related note, your income is important, but so is your debt. Having a high amount of debt, particularly when compared to your income, may scare off potential mortgage lenders because it may show a pattern of irresponsible spending and an inability to make payments on a loan in the future.
There is no magic number, but, generally speaking, mortgage lenders want to see a stable work history before making a loan offer. This is because a rock-solid history shows you have an ability to hold down a job, to make a steady income, and ultimately to be a good investment for a mortgage company. Gaps or lay-offs are not the end of the world, but it is important that you can show consistent employment in your work history.
Remember, every lender is different and examines risks in different ways. Some factors that barely matter to one lender may differ to another. Your best bet is to work with a mortgage broker that will direct you to a lender who will best satisfy your individual circumstances. For your best mortgage broker result, click here.