The Top 5 Factors Lenders Review
Getting a mortgage can be intimidating and overwhelming. Friends, family and colleagues often offer well meaning advice. It’s easy to get caught up in the ‘water cooler talk’ and believe that your experience in getting a mortgage is going to be the same as theirs. Using a professional will help you to stay calm, be patient and to trust the process. It’s important to understand that there are several moving parts to a mortgage and that every mortgage is structured to meet each individual’s personal situation and goals.
When considering buying a home the first step to take is to get pre-qualified or pre-approved by completing a mortgage application. The lenders look at five basic details of your information to make the overall credit decision and offer you a suitable program.
First is your credit score
Your credit score is a major factor in getting a mortgage. You may think you have excellent credit and will get the best rate going or you may think that you have terrible credit and won’t qualify for a mortgage. However, there are financing options for all ranges of credit scores. The interest rate you get may vary even if your score is 5 points lower than your friends or family. In general, the rate might not make as big of an impact on your monthly payment as you think. It’s important to consider how the monthly payment fits into your budget.
Second is loan to value
Loan to value is how much money a consumer is borrowing compared to how much money the property is worth. Rates and programs can vary depending how much money you put down or how much equity you have in the property when refinancing. As mentioned above every mortgage loan is different based on your unique scenario.
Third is your debt to income ratio
Debt to income is how much overall monthly debt you have compared to how much monthly income you are earning. In general, it’s better to have less debt, but there are programs available for all situations.
Fourth is the type of property
Buying an owner-occupied single-family residence is very different than buying a four-family multiplex investment. Different levels of risk result in different programs that lenders will offer.
Fifth is the loan amount
The lenders need to consider the risk involved in funding a loan for $1,000,000 on a home versus a loan for $300,000. The program and rate will be different based on the individual loan amount.
Those are the top five factors that lenders will look into when reviewing your overall mortgage request. Remember to let the professionals do their job and always be aware that every situation is different. Also, keep in mind that the market changes every day so even if your situation turns out to be very similar to someone you know it really depends on the timing. Rates are going up but they are still historically low so it is a great time to buy or refinance to consolidate debt. Contact one of our professionals today to see how you can take the first step.