How do you know if you could qualify for a mortgage loan?
Here are the general guidelines:
You need to have a 2 year work history, preferably in the same line of work.
You need to have at least a middle credit score of 620.
We would need a 2 year verification of rent and this is done in 2 ways- a Verification of rent signed by the apartment management company (or real estate management company) or your cancelled rental checks.
Now, sometimes you may have been staying at your folks house or in a situation where you haven't been paying rent for the last 2 years. This is called payment shock because you would be facing a future mortgage payment that you haven't been paying before. Compare that to a situation where you have been paying rent for say, $1200 a month and your new mortgage payment would also be $1200 or less. In this instance, there's no payment shock and would be favorable. However, a payment shock would be a concern for the underwriter of the loan but this could be compensated by 3 factors.
You need to have low ratios , at least 2 months reserves and a good clean credit. What are ratios and reserves? Ratios could be understood by the following formula:
Your new mortgage payment + car payment + min. payment on credit cards, etc. / (DIVIDED BY) Your average gross monthly income.
This number should be less than 0.41 or 41%. The lower you are on this number, the better. If you are slightly over, it's ok just as long as we have compensating factors like reserves.
What are reserves? After you pay your down payment and closing costs, the underwriter would be looking for at least 2 months mortgage payments (reserves) left from your account. Of course, the more money you have left over - the better. The mortgage payment would include principal, interest, taxes, insurance and association fee (if applicable)
Lastly, you need to have a good clean credit where you have no foreclosures, no bankruptcies nor collections. If you had a bankruptcy or foreclosure, there are set time limits on when you could start purchasing a house again and that's covered in another video. If you have collections, we would need to look at what kind of collections you have (medical, autos, utility companies, etc) and how much the collections are that are outstanding.
So this is generally how we would look at your file and see if you could qualify for a loan. I say generally because to be honest, each loan applicant and their respective situation is unique.
One of the first things I do is to look at the credit report. This is where I find out potential concerns, if there are any. Next I look at the employment history and bank accounts. On the employment history, I would be looking for gaps in employment and on bank accounts, I would be looking at NSF's (non-sufficient funds) where the balances become less than zero. These are all underwriter concerns and it needs to be addressed and explained.
All of these maybe a bit too overwhelming for you. So the best thing to do this is to call or email me so we could look at your particular situation.
How do you know if you could qualify for a mortgage loan?
By: Rigs Morata
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