Qualifying for a Loan

Qualifying for a Loan

When qualifying a buyer, a lender will take a look at credit, income, liabilities, and assets. It’s important to sit down with a loan originator to take a look at these items together and find out what you qualify for. Here are the following documents needed to start the pre-approval process:

– 2012 and 2013 Signed Federal Tax Returns

– 2011, 2012, and 2013 W2s and 1099s

– Last 30 days of paystubs

– Last bank statement

– Copy of Driver’s License

What lenders look for with these documents:

  1. Credit: Most lenders will require a minimum credit score of 640 with little to no derogatory trades like late payments, collections, judgments, bankruptcies or foreclosures listed on the credit report. If you have any of these derogatory trades, you can probably still qualify for a loan. Please reach out to us so we can take a look and see if there’s anything we can work with you on to get you in the right spot.
  2. Income and Liabilities: Lenders must make sure you’re able to pay back the mortgage and can usually only go up to a certain debt to income ratio. The lender will add up all your current monthly liabilities reported on your credit (credit cards, car loans, mortgages, student loans, etc.) plus the new monthly payment you will take on with the new mortgage and divide this total number by your monthly income. Recent guidelines have limited this debt to income ratio to 43%. But there are exceptions if you have a large amount of money saved up.
  3. Assets – lenders will also make sure you have enough assets to cover the down payment and closing costs. Refrain from depositing a bunch of money into an account or transferring money between accounts. This is because every lender must have you write a letter of explnation and source all deposits that are 25% of your monthly income or more. This rule is to abide by the Patriot Act to make sure you are not a terrorist or laundering money for terrorism.

Please let me know if you have any questions, comments, or referrals.

Your Lender for Life,

Lauren

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Debt-to-Income Ratios Can Derail Your Home Purchase

Great blog for first time homebuyers to better understand DTI qualifications.

Find Your Balance

162720557 You’ve got your down payment. Your credit score is fantastic. You’ve even figured out your monthly budget for housing expenses.

So now you’re ready to charge ahead into the home buying process, right? Maybe not. If you’ve overlooked your debt-to-income ratios, you might not be as mortgage-ready as you thought.

What are they?
As the name suggests, debt-to-income ratios (DTIs), are ways of measuring a person’s monthly debt payments as they relate to incoming cash.

There are two main types of debt-to-income ratios used by mortgage lenders. These are known as the front-end ratio and the back-end ratio. The front-end ratio measures monthly payments for only housing-related expenses, like mortgage principal, interest, taxes, mortgage insurance, homeowner’s insurance and HOA fees (if applicable).

The back-end ratio encompasses all debts that are currently or will be paid on a monthly basis, like the housing-related expenses, home equity loans, credit card minimums, student…

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