Educating Home Buyers for over 20 years!

Buying a home has been part of the American dream for decades. It is a significant long-term investment that often represents the foundation of our lives, providing financial and emotional security. In many cases it is also the largest single transaction most people will decide to make. That is why we believe it’s so important to choose a home and a mortgage that are well suited to your needs. This content is designed to help you learn and make smart decisions about the home buying process.

 

You don’t have to go it alone. We can assist by providing great information though workshops in your area.

 

It is a good idea for you to understand your mortgage options and how much they may cost so you can make an educated decision about the home financing package that fits your needs.

 

How Do I Qualify For a Mortgage?

 

In a general sense, most lenders use the same basic standards in evaluating borrowers for a mortgage. In simple terms lenders look at the 4 C’s: Capacity, Character, Capital and Collateral.

 

Income (Capacity)

 

Lenders have underwriters that review your file and are the individuals that make a decision on your loan. Their job is see if you have steady and sufficient income to make the monthly payments. This income can come from a primary, second, or part-time job(s), overtime and bonuses, commissions, self-employment, retirement benefits, pensions and annuities, public assistance, child support, alimony or maintenance payments, veterans benefits, disability payments or rental property income. Alimony and child support need not be noted unless you want to have them included as the basis for repayment of the debt.

 

The underwriter is looking for income that is likely to be continuous and ongoing for the next three years. Their job is documenting your “ability to repay”.

 

Credit History (Character)

 

Your credit history can help lenders determine the likelihood that you will you’re your payments on time. It shows whether or not you paid back the money you borrowed in the past and have made the payments on time.

 

Your credit file will normally have three FICO (Fair Isaac Corporation) scores. These scores are created by this company that specializes in what is known as “predictive analytics”. They take the information in credit reports, analyze and predict what is likely to happen. They create credit or FICO scores to help lenders decide which borrowers are more probable to pay their mortgage on time.

 

Savings (Capital)

 

This is the money that will be used for your down payment and closing costs. The savings can be money in a savings account, CD’s, retirement [401(k)] account, or a gift from a relative.

A lender wants to see that you have the capital to fulfill your obligation to purchase a home. Ideally, you should have enough savings to act as a source of funds for your down payment and reserves, which are funds to cover anticipated monthly mortgage payments should anything happen to you or your job.

 

Property (Collateral)

 

Your lender will require an appraisal on your home to determine its market value in comparison to similar houses that sold recently in the neighborhood.

Your lender will also look at the type of the property and whether there are additional fees such as homeowner’s association dues.

 

If you’d like to be pre-approved for a mortgage loan, you do not need to have a property in mind. You can actually get a conditional approval pending the property appraisal. This can be a smart move for home buyers.