Understanding the Mortgage Lending Process
Understanding the logistics involved in mortgage underwriting will not only help you know your loan options but also help you make a sound decision when refinancing your home or making plans to buy a new one. You may choose your bank or have your realtor recommend one. However, understand that all lending institutions follow different rules when it comes to underwriting. This is what determines your success in getting the mortgage loan.
The type of income you have listed will be used in determining whether you are legible for a loan or not. It is an important variable because it is the primary determiner of your ability to repay the mortgage. Advancement opportunity, type of work, educational training required for your job as well as the length of time you have been employed are all considered in this scenario. This is used in calculating your gross income per month.
Liabilities and debt cannot be ignored either. These affect your cash flow. Lenders need confirmation that you will still have enough amount to pay their loan after you have been deducted to pay for your debts. Credit cards, loan, and leases are all part of liabilities and debts. However, clothing expenses, utilities, food, and insurance are not. If the loan you are repaying will be done in less than 10 months, it is not factored in when calculating your debts and liabilities. Another thing many people disregard is co-borrowing for a relative or a friend. This can land you in problems if the person you co-borrowed for is not responsible. For a higher credit rating make sure your credit card balances are below 29% of your credit line. This is a key number and will help increase your score. Another critical factor is your ability to pay your bill on time every month. When you look like a responsible borrower you will be a better candidate in the bank's eyes. Additional information on lending requirements can be found in a lot of places, for example, here is a video with some good information.
Credit history is what lets many people down when applying for a mortgage loan. The main credit bureaus in your country will have to give a report of your creditworthiness when it comes to repaying loans. Remember that they provide a history of all your borrowing and repaying durations. Therefore, do not that the loan you borrowed 20 years ago and took forever to repay is not going to affect your rating. Thus, if you are planning to take a mortgage loan in future, ensure you start preparing for this early enough so that you do not realize you are not creditworthy when you have chosen your dream house already and made plans on moving in, click here to get started!
Know more about loans at https://en.wikipedia.org/wiki/Commercial_lender_(U.S.).