mortgage-applicant

“What can I do to improve my chances of qualifying for a loan?” is a common question we hear in the mortgage industry. While there are many factors that go into determining a potential borrower’s creditworthiness, there are three main components lenders use to define an attractive mortgage applicant: credit score, down payment and income. By understanding how these three components affect your ability to obtain a mortgage loan, you’ll be able to easily navigate the mortgage process.

Credit Score

A credit score is a three-digit number that indicates your creditworthiness and influences your ability to obtain a loan. While most people understand that a higher number is better, some are left wondering how their score is determined and what an optimal range is. Although most mortgage lenders require applicants to have a minimum credit score of at least 620, a higher score often means better loan terms and better interest rates.

Before you begin searching for houses or apply for a mortgage loan, it’s important to start the pre-approval process early and allow a lender to pull your credit. By doing so, they will be able to assess your overall financial situation, determine how much you can reasonably afford and discuss relatively quick ways you can improve your credit score.

Down Payment

Some borrowers think they need to have a down payment of 20% in order to get a house, while others have heard that putting more than 3.5% down is foolish. In all honestly, neither of these statements are necessarily true. The question of “how much should I put down on a house?” really depends on each individual’s unique financial situation.

Although a larger down payment could potentially improve your interest rate, there are many low-cost down payment options available with great terms, too. For some, a mortgage can be written with no down payment and great terms. For others, the best terms come with a down payment of anywhere between 3.5% and 20%. The only way to find out what options are available is to speak with a qualified mortgage lender. Rest assured that no matter what you put down, there is probably a loan program for you.

Income

Income is the most straightforward, yet the trickiest of the three major mortgage components. Each mortgage program has preset limits of how much of your income can be used toward monthly mortgage expenses.

But, what qualifies as income? For W-2 employees, it is your wages. But for self-employed individuals or individuals who receive certain fixed incomes, it can be pretty complicated. If you fall into one of these categories, don’t despair. We can find the right loan program for you and help get you into your dream home.

As you can see, there is a wide range of answers for what makes someone an “attractive” mortgage applicant. Conventional wisdom states that the better your credit, the more you have to put down and the higher your income, the better your chances of qualifying for a mortgage loan will be. However, if you don’t fit into the traditional mold, there are still loan options available to help you get into a new home.

If you want to learn more about being the best applicant you can be, or if you are ready to take the next step, please leave a comment below or contact me at (248) 658-2643.

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medelstein

Marc Edelstein has more than 15 years experience originating home loans. He has built his business using three core values: honesty, integrity and exceptional customer service. His ultimate goal is to educate consumers and communicate extremely well with all parties on each and every loan. When he’s not helping people achieve the American dream, he spends his time golfing or at the lake with his wife and two children.

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