8 Things to Consider When Applying for a Mortgage
By Loral Langemeier (as seen on the Dr. Phil Show and website)

#1 -Mortgage Criteria: Credit. When lenders evaluate your loan application, they use a process called underwriting. They judge your ability and willingness to repay by looking at your credit history. Generally speaking, someone who has a track record of making payments on time will probably do so in the future. This is conversely true for those who have a habit of making late payments… the assumption is generally made you will be late with your mortgage as well.

#2 -Residency. Lenders like to know where you have been residing for the last two years. They like to track how timely you have made your payments to your landlord or mortgage company. They would like to verify that no more than 2 late payments have been made in the last 12 months.

#3 -Employment. Lenders are looking for borrowers who have stable monthly incomes. They would like to verify where you have been employed for the last 2 years. Frequent job changes in different fields are viewed negatively.

#4 -Income. Stable monthly income is verified from all sources for the past 2 years. The lenders are looking at your income history to predict the future. For those who received child support, the support does not usually count as income until it has been received for 12 months and it must be verified as having been received. All calculations for a mortgage are based on your gross monthly income, before taxes are taken out.

#5 -Assets. They will look at your assets in the bank, or in some other savings entity, and will be verified by the lender. Those who have established a pattern of saving are given preferred consideration. When obtaining a mortgage, it is generally required that you prove you have at lease two months house payment in reserve someplace.

#6 -Debts. Who do you owe? How much do you owe? What are the minimum monthly payments? What are your ratios of debt to income? Your house payment should not exceed 28% of your gross income. Your house payment plus minimum monthly payments on all existing debt should not exceed 36% of your gross monthly income.

#7 -Funds Needed to Close. If you are purchasing a house, the lender is very concerned that you have sufficient verifiable funds to close the transaction. Where are the funds now? How long have they been there? Where did they come from? Gifts from a relative are acceptable but the purchaser generally needs at least 5% of their money in the transaction.

#8- Property. Not only does the person who is applying for a loan have to qualify but so does the property you plan to mortgage. Usually the lender has more invested in the property than the owner. They want to make sure that what they are lending against has sufficient value. The value is estimated with some accuracy by ordering an appraisal form a certified appraiser. Realtors are good at estimation market value, but lenders prefer a written appraisal.

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