Home Buying 7-Step Plan, Step 5

Home Buying 7-Step Plan, Step 5

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Financing Your Home

mortgage application

Prior to 2007, at least for the first several years of this decade, qualifying for a mortgage wasn’t nearly as difficult as it is today. Mortgage qualification standards were lowered for a time, meaning tens of thousands of homeowners purchased homes who should have never been qualified in the first place.As a result of the lowered standards, many of these same homeowners have defaulted on their loans, unable to keep up with payments. Creditors have finally raised the bar, making it tougher for consumers to qualify for a home loan.

If shopping for a home mortgage, there are four criteria you must keep in mind when applying. Where you stand in each area can determine if you are approved or not and what your loan terms will be.

Home appraisal — You purchased a 4 bedroom, 3 bath colonial, paying $385,000 for the home, be putting $85,000 down. With $300,000 to finance, your mortgage broker will make sure that the home is worth the amount you are paying for it. In this current market of declining home values, that isn’t a sure thing.

Your credit rating — Your credit reports will be accessed and your credit score will be obtained. Depending on how high your score is, the mortgage terms (interest rate) will be set accordingly. Expect a lower rate if your credit is excellent.

Your capacity to repay the loan — Can you afford to repay the loan? Do you have sufficient assets and income to meet monthly payments? These questions must be answered before a loan offer is given.

Your employment — How long have you been employed? Where do you work? Are you paid a salary, salary plus commission, or are you paid hourly? These questions are the final determining factor on whether you will be offered a loan or not.

The tougher standards may seem unfair to some consumers, but they are in place for your protection and to protect the lender’s assets. If your credit is good or excellent and all of the other criteria have been met, then receiving approval for a home loan will likely happen.

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