Qualifying for a Mortgage
Lenders look for a number of things when assessing your qualifications for a mortgage, You don’t have to be perfect.
For many of us, the prospect of obtaining a mortgage is, at least, a little bit scary. Many people seem to think lenders are looking for reasons to turn them down.
The true fact is, our EFS Mortgage Brokers are looking for ways to help you GET a mortgage. If you work with an EFS Broker before you decide on buying a home, you will know whether you’ll qualify for a mortgage large enough to finance your investment. Here's an idea of what lenders consider when they decide how large a loan you can qualify for—in three broad categories.
1. Your household income and expenses
Lenders review your income in several different ways lokking at your total gross amounts. But how you derive or earn your income is also important. Derived income from overtime, bonuses and commissions vary greatly from year to year. If these income sources are a large percentage of your derived income, your lender will request how reliable they are.
The lender will also review the relationship between your income and expenses. The lender may also consider other long term debts, such as car loans or personal loans.
At first, it appears that the Bank/Lender wants to know everything about you for the loan application. Actually all your mortgage lender needs to know about you is your employment, finances and information about the home you’re buying. On providing reliable details about these topics, your application process will proceed more efficiently and effectively. It is a good idea that you bring the following documents when you meet with your Broker:
2. Employment and Income Verification
Personal Assets Information
- Current balances and recent statements for any bank accounts, including both checking and savings.
- Most recent account statement showing current market value of any investments you may have such as stocks, bonds or certificates of deposit
- Documentation showing interest in retirement funds, if any
- Face amount and cash value of life insurance policies, if any
- Value of any significant pieces of personal property, including automobiles
3. Credit and Debt Information
The balances and account numbers of your current loans and debts, including car loans, credit card balances and any other loans you may have.
Down Payment
The property down payment is a percentage of your home's value. The type of mortgage you choose determines the down payment you will need. It can range from zero (0%) to 20%+.
Borrower History
When a Lender is deciding weather to approve your Home Loan they may look at the following Borrower History Factors to ensure you have a history of repaying your debt:
- Your employment history
- Your income and outstanding debt
- Your savings patterns and amount of savings
- The type and amount of loan you are requesting
- The amount of down payment you plan to make or the equity that you have
To ensure that you are able to pay off the borrowed amount, Banks typically look at your credit history/score. Your credit score predicts how likely you are to repay the mortgage debt.
A credit score is a number that indicates statistically how likely a borrower is to repay future debts.
If you have credit problems, be prepared to discuss them honestly and come to your application meeting with a written explanation. Every Broker knows there can be unavoidable reasons for credit defaults, such as unemployment, illness or other financial strains. If you had a default on your credit file but have worked with your creditors to correct it and your re-payments have been on time for over a year, sometimes more, you may be reviewd ok.
Gaining and reviewing your credit report prior to meeting with your EFS broker, will allow you to ask any questions concerning defaults or marks on your credit file. This will enable you to take steps to correct them before you make your application.
