What Factors Determine Mortgage Loan Approval
Do you know what lenders look for when they determine mortgage loan approval? A mortgage loan is usually a commitment of 15 to 30 years, so lenders want to be sure that you have the ability to pay them back.
A lender will look at many factors before approving your loan because anything can happen in this length of time. These are the most common factors that can affect the approval of your mortgage loan from home lenders.
Credit Report
A lender will look at your credit report first from the three major credit bureaus: Equifax, TransUnion and Experian. It is important for you to review your credit report for any errors before you apply for a mortgage loan.
Over 40 percent of credit reports have errors and many of these errors are simply mistakes that should not even be on your report. Correct any errors in your credit report before you apply for any loan. These errors can play a big part in your mortgage loan gets approval or denial even if they are errors.
Outstanding Credit
How much outstanding credit you have on your credit report is another big factor in the approval of your mortgage application. It's smart to pay off as much credit debt as you can before applying for your mortgage loan so you will increase your chances to get approved.
Credit Cards
Do not apply for new credit cards or any kind of new credit, when applying for a mortgage loan. When you apply for new credit cards or close current or old accounts lenders do not like this.
If anyone advises you to close an old account, it is bad advice. Cancelling old accounts can lower your credit score because you don't have as much availble credit to you.
Debt To Income Ratio
Debt to income ratio is another big factor for determining mortgage loan approval. A lender will not approve a mortgage loan application if it shows you have too much debt. Most lenders will approve around a 45% total debt ratio with some going higher if your credit score is excellent.
Income
You need a steady income to get mortgage loan approval, so do not change jobs or quit your job before applying for a mortgage. Lenders usually like to see two years employment at the same type of job at a minimum.
Available funds
Do not make any purchases that could take your available funds before buying a home. You need the down payment, as well as money for closing costs. Lenders usually ask for bank statements for proof of available funds before approving your mortgage loan.
Down Payment
A bigger down payment offers you the best interest rates and sometimes even determines if your mortgage loan will get approved. This is what is referred to as loan to value and plays a big role in loan approval.
Interest Rate
Your monthly mortgage payment depends a lot on what interest rate you end up with. You may want to consider paying "lock-in" fees to guarantee that you still get a low interest rate if interest rates are rising. This is a common reason why people are denied approval for the mortgage loan they qualified for just a few months earlier.
Copyright © 2006 BadCreditMortgageTip.com All Rights Reserved.
This article is supplied by BadCreditMortgageTips.com where you can get mortgage information, refinancing tips and browse our recommended bad credit lenders.
A lender will look at many factors before approving your loan because anything can happen in this length of time. These are the most common factors that can affect the approval of your mortgage loan from home lenders.
Credit Report
A lender will look at your credit report first from the three major credit bureaus: Equifax, TransUnion and Experian. It is important for you to review your credit report for any errors before you apply for a mortgage loan.
Over 40 percent of credit reports have errors and many of these errors are simply mistakes that should not even be on your report. Correct any errors in your credit report before you apply for any loan. These errors can play a big part in your mortgage loan gets approval or denial even if they are errors.
Outstanding Credit
How much outstanding credit you have on your credit report is another big factor in the approval of your mortgage application. It's smart to pay off as much credit debt as you can before applying for your mortgage loan so you will increase your chances to get approved.
Credit Cards
Do not apply for new credit cards or any kind of new credit, when applying for a mortgage loan. When you apply for new credit cards or close current or old accounts lenders do not like this.
If anyone advises you to close an old account, it is bad advice. Cancelling old accounts can lower your credit score because you don't have as much availble credit to you.
Debt To Income Ratio
Debt to income ratio is another big factor for determining mortgage loan approval. A lender will not approve a mortgage loan application if it shows you have too much debt. Most lenders will approve around a 45% total debt ratio with some going higher if your credit score is excellent.
Income
You need a steady income to get mortgage loan approval, so do not change jobs or quit your job before applying for a mortgage. Lenders usually like to see two years employment at the same type of job at a minimum.
Available funds
Do not make any purchases that could take your available funds before buying a home. You need the down payment, as well as money for closing costs. Lenders usually ask for bank statements for proof of available funds before approving your mortgage loan.
Down Payment
A bigger down payment offers you the best interest rates and sometimes even determines if your mortgage loan will get approved. This is what is referred to as loan to value and plays a big role in loan approval.
Interest Rate
Your monthly mortgage payment depends a lot on what interest rate you end up with. You may want to consider paying "lock-in" fees to guarantee that you still get a low interest rate if interest rates are rising. This is a common reason why people are denied approval for the mortgage loan they qualified for just a few months earlier.
Copyright © 2006 BadCreditMortgageTip.com All Rights Reserved.
This article is supplied by BadCreditMortgageTips.com where you can get mortgage information, refinancing tips and browse our recommended bad credit lenders.
posted by Gary at 1:49 PM
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