WHAT DO HOME LOAN LENDERS LOOK AT AND CONSIDER?

WHAT DO HOME LOAN LENDERS LOOK AT AND CONSIDER?

FHA versus Conventional

One of the most exciting things an adult can ever go through is the whole process of acquiring home ownership. It can be all kinds of things from scary to terrifying to riveting and pleasant. After all, houses are investments at the end of the day no matter what people say.

If you’re currently looking for homes to inhabit and potentially buy, there is a huge chance you should also be looking for a loan that compliments your house-shopping. While having your own home can bring out feelings of pride and joy and accomplishment, they can also cost you a fortune. Not everyone has hundreds of thousands of dollars in their bank accounts just waiting to be spent.

Luckily, there are several loans that don’t hesitate in meeting borrowers halfway. One does not have to have an overwhelming credit score to bag a loan, although this certainly does help. If you’re now in your journey of applying for loans, review the following details to make sure you know exactly what lending institutions—FHA lenders or not—look for and consider before giving you the green light.

1.) What’s your Credit Score?

The range starts from 300 all the way to 850. It is important to know that this functions the way school grades do: the bigger the digits, the better. Having a low credit score gives banks the impression that you may be an irresponsible borrower or often have problems delivering payments late.

But how exactly is your credit rating evaluated? Banks and lenders look at how soon you’re able to pay off debt, how much of your credit limit you consume on a regular basis, and how long you’ve had your card. Check your FICO credit report and score and see for yourself how you fair.

2.) What’s Your Salary?

People often think that financial institutions put a premium on how much you earn a month. While there may be some truth to that, that’s not always the case. What they look at is how your income will look like stacked against your housing fees on a monthly basis. You are not expected to have a huge base pay, but your salary will be a determiner as to how much they’re able to lend you.

To make sure you have enough income to take care of monthly mortgage fees and other bills, lenders will factor in your total monthly salary from all aspects. This sum will cover income and other monetary benefits as well as interest rates and other payments. On top of mortgage payments, house taxes, and insurances, an industry rule is to never buy a house when all these exceeds one-third of your monthly income.

3.) Is Your Down Payment Ready?

FHA loans may appear to be more generous as those with a FICO credit score of 580 may only be asked to put in a 3.5% down payment. For anyone whose rating is 500 to 579, you may still qualify however a 10% down is needed to cut it. Conventional loans, on the other hand, will require a 5% to 20% down payment to close a deal.

4.) Do You Have Existing Loans?

Existing debts for things such as student or car loans may affect your cash flow and paying power. To be clear, current loans are not automatically negative things that deter a lender from granting you house money. Bear in mind, however, that lenders look at how much is left of your pay after all these are deducted and if there isn’t much to bite on anymore, chances for loan approval become very low.  

Should your finances be solid and your savings ready to be expended on land titles, closing costs, attorney fees, and other out-of-pocket expenses, applying for loans shouldn’t be a problem for you.

Before reaching out to a lender, make sure all your bases are covered and you’ve done your fair share of research. A qualifying credit rating, an able salary, and ready documents make for  smoother transactions. Note that the primary consideration of financial institutions and lenders is always to be able to protect all parties involved to minimise risk.

For loan queries, concerns, and applications, don’t hesitate to contact us!

BY BJORN