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By Chris Edison
Why do some people get their home loan mortgages approved in a breeze while
others struggle through with hiccups? What are the differentiating factors
between one application and another? What do lenders look at when they
evaluate you?
In reality, getting your home mortgage approved depends on how your background
matches the list of criteria set forth by the lender. Although these rules
that they have are not always entirely hard and fast, the loan application
officer does not stray too far away the guidelines he or she has been
entrusted with. Needless to say, applicants should at best present themselves
as creditworthy creditors and have the adequate documented records as proof
of this.
Believe or not, lenders have a scoring system for aspects of your background
that they are evaluating. The following are areas in which you will be
scrutinized on:
1.Employment History
You must have been in employment for not less than 2 consecutive years within
the same industry. This shows that you have the capability to be sustained in
a permanent position, and do not hop from one job to another. Lenders look
for stability and consistency as best they can, and your employment history
is a good basis for them to evaluate your capability to generate income to
finance your mortgage.
2.Credit History
The next indicator of your credit-worthiness is your short-term debt, a.k.a.
your credit card bills. It`s ok to have some debt on your credit card, but
you must show a history of on-time payments. Apart from that, too much debt
on credit cards with credit lines fully utilized shows the possible inability
to pay for debt. Therefore, at least six months before applying for a loan,
it would be best to clean up your short term debt as much as possible.
3. Outstanding Liabilities
The size of your income dictates the amount of liability you can support. As a
rule of thumb, lenders stipulate that a person`s total monthly payments for
liabilities should not exceed 42% of his or her monthly earnings. With this,
total liabilities include credit card debt, car loans, student loans,
existing mortgages or child support collectively. This means that in order to
qualify for your home loan mortgage, you need to reduce your monthly
repayments on liabilities to the point which is acceptable by the lender.
4.Cash and Asset Reserves
Another aspect to show that you can afford your home loan mortgage is to
provide proof to the lender on the amount of cash and liquid assets that you
possess. The minimum reserves that you have must be sufficient to pay at
least 2 months of monthly repayments for mortgage payments. Some lenders even
go to the extent of requiring 6 months worth of reserves in order to qualify.
5.Existing Housing Repayments
Finally, if you already have existing housing rental payments, there should
not be any late repayments for these within the past 12 months. This again
shows your priorities as a responsible tenant and is adequate proof to the
lender that you potentially will be a responsible borrower as well.
Some applicants who may lack supporting documents for their home loan mortgage
applications should compensate by providing documents that will help to prove
themselves to be responsible pay masters. These could be payments receipts of
utility bills, phone bills or even car insurance, which are useful documents
to be used to prove that you are indeed creditworthy.
Chris Edison is a successful author and regular contributor to http://www.
mortgage-traps.com a home mortgage loan (http://www.mortgage-traps.com>home)
information site, that reveals mortgage traps for home buyers.
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