Prior to accepting an application for a home loan, lenders will qualify you for the mortgage. Some potential applicants may feel uncomfortable about this step because they dont fully understand what qualification for a home loan means. Basically, the qualification process determines if the lender is willing to lend to you and the amount of money you can borrow. You can improve your chances of qualifying for the home loan you need by learning as much as possible about the process.
EMPLOYMENT AND INCOME
Lenders look for evidence that you will be likely and able to repay your home loan. A consistent, dependable source of income is important. Have you worked for the same employer for two years or more? If not, how long did you work for your previous employer? Have you recently changed jobs? Can you demonstrate your reasons were responsible and that the employment is stable? Expect that the lender will contact your employer to confirm your history. Steady employment indicates both personal responsibility and a reliable source of income.
The lender will require a full disclosure of your income and financial responsibilities. By comparing what you earn against what you owe, the lender will be able to evaluate your ability to meet your home loan payments.
CREDIT WORTHINESS
Before approving you, the lender will evaluate your credit report to determine the likeliness that you will make regular, timely mortgage payments. Most importantly, lenders look for a history of consistent payments made on time. They will also be looking for evidence that you use credit wisely, staying comfortably below maximum levels.
WHAT CAN YOU DO TO IMPROVE YOUR CHANCES?
Start planning well in advance to prepare for home ownership. If possible, avoid making changes to your employment situation prior to seeking qualification for a home loan. Know what is in your credit reports from the three major credit bureaus. Be sure to correct any erroneous information as soon as possible. Also, because your debt to income ratio is directly related to your ability to qualify for a home loan, pay down as much debt as possible prior to making application. All of these actions will improve your chances of qualifying for the full amount you need for your home loan.