Home Loan Approval 101

Getting approved of a home loan is complicated. A good job, good credit, and reserves in the bank does not really guarantee that you’ll be approved.

Take note that home loans are different and each lender has different criteria. For the underwriters, the criteria is clear and it’s not really difficult to make a choice. You can either comply or not. It doesn’t matter that your income could qualify you for a home twice as expensive.  Without a good credit score, work experience, you won’t get approved on your mortgage loan application.

Generally, some criteria are the same throughout the mortgage lending world:

Consistent Work Experience – Lenders like to see two years of work experience within the same field, preferably from the same employer. However, you may not be able to get approval for your home loan especially if it is in a different field.

Satisfactory Debt to Income Ratio – To get a home loan a lender likes to see that you’re current debt is manageable in relation to your income. By and large, your total debt plus the mortgage loan should not exceed 35% of your total income. Lenders will usually not allow your home loan to exceed 28% of your current income if you have no consumer debt,. These are just certain guidelines, and different government loan programs have different standards.

Down Payment – Almost all home loans require at least some down payment. Most housing loans require a down payment except for some like the rural housing loan.  {FHA home loans usually require 3.5% down}. In order to issue a Conventional loan, 10-30% down is required.

Cash Funds in the Bank – Not only do lenders want you to have money to make a down payment, but they also want you to still have cash in the bank after your down payment. For most investment properties like Homes for Sale in Lehi UT, banks require six months worth of payments as reserve in your bank account.

Credit – To buy real estate you need to have a credit history.  In other words, you have to have past loans.  You also have to have a decent FICO credit score. To get the best interest rates your middle FICO score should be above 740.  If your credit score is below 620, you’re chances of home loan approval are pretty slim.

Before shopping for Phoenix Arizona Homes for Sale, you’ll want to get approved for a home loan to see if it’s even possible.  One of the best ways to get the home loan possible is to ask multiple lenders, banks, credit unions, and mortgage brokers.