5 Factors Affecting Mortgage Eligibility
Whether one wants to use a mortgage to finance a new home or decides to refinance his current home for a variety of reasons, such as personal finances, getting a better rate, and so on, it’s important to start the process by understanding some of the factors that often become major considerations during the qualifying process.
Given that, for the vast majority of us, our home is our single-largest financial asset, doesn’t it make sense to invest the time and effort necessary to comprehend and utilize the best methods for achieving this goal? With that in mind, the purpose of this article is to briefly consider, examine, review, and discuss 5 factors that may influence whether or not a person qualifies for these loans.
Lending institutions take into account a variety of factors, one of which is the overall debt-to-earnings ratio. Many people will refuse to consider the candidate if this percentage is too high! Credit card debts, unsecured loans, other debts and obligations, and so on are examples of these debts. When one decides to move forward, look into this first and try to reduce the overall debt!
There are only two ways to lower this percentage or ratio. The first is to increase one’s earnings/income, while the second is to reduce debts. For the most part, the second approach is the one that is easier to deal with in a controlled and timely manner!
Housing Debt-to-earnings Ratio
There are two ratios that lending institutions almost always take into account and thoroughly examine. These ratios should not be regarded as recommendations, but rather as firm/strict limits! In addition to being a requirement for obtaining a mortgage, one should seriously consider how anyone could be comfortable with the monthly carrying costs of home ownership if this is too high!
Debt Repayment and Credit Rating
It’s important to think about how you’ve handled previous and/or current debts! If you’ve shown that you’re responsible in this area, it’s a positive action, rather than a less-than-stellar performance in the past! Lenders use a few credit agencies, and one’s credit rating, which one earns and saves, is a significant factor!
Past, Present, and Future (Foreseeable) Earnings, as Well as Employment/job Security
Lenders look at your past and present earnings, as well as whether you are gainfully employed or self-employed, and whether you have a good chance of continuing to earn enough money! The more self-assured you make them, the more likely you are to qualify for a mortgage.
As previously stated, obtaining a mortgage, particularly the best one (with the best terms), is dependent on a number of factors. The easier and less stressful the process is, the better one prepares and addresses these issues upfront!
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