Ready to buy a home? Before you apply for a mortgage, it’s a good idea to understand what lenders look for in a borrower. By preparing in advance, you can improve your chances of securing a favorable loan.
Credit score and credit history. Lenders use your credit score to gauge your reliability as a borrower. A good score can help you secure a better interest rate, while a low score may signal risk to lenders. You can improve your score by paying bills on time and reducing outstanding debt.
The stability of your income. Having a steady income reassures lenders that you’ll be able to make mortgage payments. They may ask to see things like tax returns and bank statements. If you’re self-employed, additional paperwork may be required.
Your employment track record. Two years of consistent employment is a common requirement. Gaps or frequent job changes may raise questions, but a solid track record demonstrates both stability and reliability.
Any existing debt. Lenders will evaluate your debt-to-income ratio, which is the percentage of income that goes to paying off debt. A high debt-to-income ratio may indicate potential challenges in managing new payments.
Assets and savings. Assets such as stocks and savings accounts provide a financial cushion, showing lenders you have reserves in case of any income changes down the line.
Down payment size. If you have a larger down payment saved, it often means better loan terms. Saving up can help you secure a more favorable rate and reduce monthly costs.
For more advice on these and other requirements, call or email me today. I’ll happily discuss all things mortgage!