When a mortgage company makes a decision about a home loan application, the lender primarily considers three main factors: (1) your ability to repay the loan; (2) your willingness to repay the loan; and (3) the collateral.
Ability to repay the mortgage is determined by verifying your current employment and analyzing your total income. Lenders prefer for you to have been employed at the same place for at least two years or to at least be in the same line of work for a few years. Your estimated monthly payment will be compared to your monthly income and debt.
Willingness to repay is influenced by how you have paid previous loans and by examining how the property will be used. Willingness can be gauged by your credit report and previous commitments to pay rent and/or utility bills.
Collateral is the property that is pledged by a borrower to protect the interests of the lender.
It is important to remember that there are a set of rules a lender uses to assess these factors on each loan to determine if the lender will ultimately lend you money. These rules are called a Credit Policy. Each loan application is evaluated individually on a case-by-case basis. Many loan applications may come up short in one area, but make up for it with other strong points. These compensating factors may include a large down payment or overall financial health. Securing mortgage insurance to protect a lender in the event you are no longer able to pay the mortgage may also impact qualifying for a home loan.
Contact Academy Mortgage with any questions about qualifying for a home loan.