Be it a First-Time Buyer learning the process, a Move-up Buyer or a HomeOwner looking to refinance/renew your Mortgage, you must always be ready to answer the below when applying for a Mortgage.
Lenders will approve your Mortgage based on their impression of your ability and INTENT to pay it back. To figure this out, they look at five things: creditworthiness, income, job longevity, job stability, and future income prospects. We’ll tell you how to make sure you look good in each of these things, so that you’ll get a “YES” when you want to borrow money for your new home.
Creditworthiness is your history of borrowing and repaying against things like car loans, credit cards, rent, and whether you’ve ever filed for bankruptcy. Find out what credit bureau the Lender uses, then call or visit that same bureau for a copy of your credit report. Some are even available online.
This is to make sure that there are no errors or surprises that you’ll have to explain to the Lender. If there are mistakes, it can take a few months to resolve, so it’s good to have a compelling explanation ready when the Lender sees it! The best way to demonstrate that you are “creditworthy” is to pay your bills in full and on time, particularly for the year or two before you want to get a mortgage.
Lenders want to know that you have a history of sufficient and consistent income – so that you’ll be able to repay the loan. So, when you submit your paperwork to a Lender, make sure to take a letter verifying your employment (how long and what your salary is), your last couple of paychecks, and your last couple NOAs.
3. Job Longevity
Lenders are looking for borrowers who have a stable source of income. If you can show that you’ve been employed at least a year in the same company, you should be fine. There is a minimum that we would discuss based on your circumstances.
4. Job Stability
Again, lenders like stability – they tend to think that your mortgage payment behavior will reflect your employment behavior. So, don’t make lateral moves between companies just for the sake of change. If you make moves, do it for promotion, or to earn more money.
5. Future Income Prospects
Because most mortgages are paid back in 15 to 30 years, Lenders are interested in people who will have income for that amount of time. Young professionals, or those with high-demand skills, are the most appealing to Lenders because their income will only increase over time. If you can demonstrate that you have a career plan that only gets better over time, you’ll be in a strong position to borrow.
So essentially, pay your bills on time, stay with an employer, have a career path that shows potential, and you’ll be sure to get a “YES” when you borrow.
Lenders are required to tell you what the APR is on any loan that they’re offering to you so you’ll know what the real interest rate is, including all of the additional costs.
So, when you’re calling around looking for the best rates, make sure and ask what the APR is on each mortgage you’re being told about!...Let's leave what APR is for another blog post.