The global financial crisis that began in 2007 made many would-be homeowners uncertain about whether they could qualify for a mortgage. In considering a mortgage application, lenders look at four factors: income, credit, down payment and the price of the home. As of 2010, banks and other lending institutions had tightened their lending requirements. Nonetheless, borrowers who are willing to work toward addressing these factors have a good chance of qualifying for a mortgage.
Realistically assess your financial circumstances. Lenders prefer a potential borrower’s mortgage payment, including insurance and other fees, to be less than 28 percent of income before taxes. Your total debt load, including mortgage payments, should not exceed 36 percent of your income, according to the credit counseling firm InCharge. Excellent credit or a large down payment may convince the lender to stretch the limits somewhat. If your down payment is less than 20 percent, you will need to obtain mortgage insurance, according to Kiplinger magazine.
Get a Grip on Your Credit
Check your credit with all three major credit reporting bureaus, TransUnion, Equifax and Experian. Correct any errors and attempt to clean up any accurate adverse entries. Begin this process well in advance of seeking a mortgage. Borrowers need a minimum 720 credit score to qualify for the best mortgage terms, according to Kiplinger.
Obtain Prequalification or Preapproval
Prequalification is an assessment by a bank or lender of the maximum amount of a mortgage you are likely to qualify for, based on your reported income and credit scores. Prequalification letters are usually available at no charge and carry no obligation to use a particular lender. Prequalified buyers often receive preferential treatment, and many real estate agents require prospective buyers to obtain prequalification letters. If possible, obtain a loan preapproval for a specific amount. Preapproval means that the lender has made a thorough evaluation of your credit and is willing to offer you a loan. Final approval depends on conditions relating to the actual home you wish to purchase, such as the property appraisal.
Consider a Mortgage Broker
If your credit is less than excellent, a mortgage broker may help you obtain a mortgage at more reasonable terms than you could obtain on your own. If you decide to use a mortgage broker, check out her credentials thoroughly. As of 2010, mortgage brokers in California are required to obtain licenses and pass criminal background checks, according to Bloomberg. California does not have a separate licensing program for mortgage brokers, according to the Mortgage News Daily website. Instead, brokers can obtain a Negotiator’s License through the Department of Corporations, using the California Finance Lenders Law. Brokers may also obtain a California Real Estate Broker’s license, which automatically qualifies them as mortgage brokers.
Seek Federal Mortgage Assistance
Borrowers with credit scores of at least 580 can qualify for a Federal Housing Administration loan with a 3.5 percent down payment. Borrowers with credit scores of less than 580 will need a down payment of at least 10 percent, according to the FHA website. Veterans and active military personnel, including members of the National Guard or reserves, can often obtain a certificate of eligibility for mortgages administered by the Department of Veterans Affairs through its website.
“Those headaches, troubles and hassles could be avoided if only we can reach out to those homebuyers and offer them our services. I know how hard it is to lose a home and even more difficult to see your hardly earned money stuck in a real estate without any use. The Barbarasmallteam specializes in short sales and foreclosures. Just reach out our hand, lets’ talk.”
– Barbara Small
Source: http://homeguides.sfgate.com/tips-qualifying-mortgage-3226.html
My Blog 