1. How Much Can I Borrow?
2. What's My Interest Rate?
3. Can I Qualify For A Loan?
All lenders use the same criteria to determine the answers for you, based on income and financial documentation you provide, and an in-depth analysis of your financial background by a lending Underwriter. Here's what your lender will look at:
1. Your tri-merge credit report and credit scores (also knows as your FICO). Your history with credit -- student loans, car loans, credit cards -- determines your score as comprised by the three national credit bureaus, Equifax, Trans-Union and Experion. The higher your credit score, the better the rate a lender will be able to offer you. Scores range from 350-850, and typically the better interest rates are offered to those with scores of 680 and above.
2. Debit-to-Income Ratio (DTI). Based upon your desired home purchase price, your lender calculates your projected mortgage, tased, insurance and if applicable, homeowner's dues and/or mortgage insurance payments along with the monthly payments on all of your lines of credit. This monthly debt responsibility is divided into your monthly income (gross income for W-2 employees, net income for self-employed). If your debt load including your future mortgage does not exceed a certain debt-to-income threshold, you will qualify for the loan. This ratio varies with different types of loans.
3. Verification of Assets. A lender will ask for checking, savings, retirement and inestment statements to verify your resources.
4. Verification of Employment. Lenders look for a two year work history of full time employment in the same field of work. Part-time, commissioned, seasonal and other types of employment may be used; it's best to talk to a lender about your specific situation. In addition, the lender will call your employer the day before your loan funds to ensure that you are still employed!
5.Verification of Rent. Most loan programs will require a lender to obtain proof that the borrower has at least a 12 month history or on-time rent payment.
6. How you will use the property you are going to purchase: rates are different for primary residences, second homes and investment properties. They may also vary for high-rise condos and manufactured homes.
7. The amount, if any, of your down payment.
8. The amount of documentation you provide with your application. You may be able to "state" you income and/or assets available, rather than providing documentation (ie: W-2s, tax returns, paystubs). If the loan program you want allows this, the interest rate will be higher.