Applying for a Home Loan: What the Lender Sees
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by: marciafreeman
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Choosing a home with the best master bathroom or most durable floors can seem like a very important part of the purchase process. But, really, thats just the fun part. The hard part is qualifying for a home loan.
Normally, your ability to qualify for a home loan will be dependent on how well you meet up to the following two standards. The first standard of measure is that you be in a financial position that will allow you to pay back the loan. And, unfortunately, lenders do not make the application process too easy for you; they look deeply into your financial situation to decide whether or not you will be able to repay. The number one thing lenders will look at? Your current employment.
Many home loan applicants believe that having good employment will lead to their approval for a loan; generally, though, qualifying is more complex than that. In addition to what you do, a lender will also examine the length of time youve been with an employer or working in a certain field. Two years with a particular company or working in a particular field will be considered steady employment, and will help you to present yourself as a good risk.
After they examine your job history, a lender will then look at how your debts add up with the new home loan included, and how those debts compare to your income. Paying off as much debt as possible before applying for a home loan is a good idea. Why? Because the lender will consider you qualified for a home loan only if he or she feels that you have enough money to pay payments with a certain level of ease. If the lender you work with feels that you have too many debts when compared to your income, he or she may decide that it would be better to offer you a smaller loan or a higher interest rate. Or wont approve you at all.
Your lender has evaluated your debt and income comparison, and feels that you can make payments comfortably? Now theyll look at the second major home loan approval criteria: what they call your "willingness to pay." To determine whether or not you can be counted on to pay your home loan, they take a look at your credit report and payment history. If you have consistently been on time in paying your debts in the past, it will look good on your application for a home loan.
Another thing that home loan lenders consider when determining whether youll be willing to pay? What youre doing with the home youre buying. If, for instance, you are planning to live in the home as your primary residence, a home loan lender will generally believe you have strong motivation to repay your home loan.
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