Home buyers often hear about brand new properties and trendy developments that provide family-oriented activities. Although, securing an affordable home loan is the challenge that seems to present a bar that is too high to hurdle. Perennial Funding provides valuable tips and insight for borrowers who want to buy a home, while the mortgage interest rates are still at historically low levels.
Using a folder, assemble recent financial documents that a mortgage loan officer is likely to request, such as W-2 forms for the past two years, two recent pay stubs and tax returns that were filed for the last two years. While, many items are standard requirements, there might be a need to present program-specific documents. Prior to funding, a mortgage lender might request bank statements, proof of certain financial assets or documentation to help verify other types of qualifying income.
Keeping accurate financial records could lead to a quicker mortgage loan approval.
Since mortgage lenders will not approve every application to finance homes that are selling for a neighborhood’s median price point, it is wise for a borrower to have a basic idea about qualifying for an affordable home loan.
Using the basic ratio for a conventional mortgage loan, a home buyer’s projected monthly mortgage payment, which includes the real estate taxes and homeowners insurance should not exceed 28 percent of their combined monthly income.
Also, when adding other bills to the mix, such as credit cards, car loans, installment debts and other items that may appear on the borrower’s credit report, the conventional threshold is set at 36 percent of the combined monthly income.
Government-backed loans often have higher debt-to-income thresholds. However, in many cases, a lender may be able to approve a mortgage loan that has extenuating circumstances or other compensating factors. For instance, some lenders might allow ratios above 36 percent for a borrower who plans to make a down payment on a home that exceeds 30 percent of the sales price.
Speaking with a licensed real estate agent is an excellent way to determine whether it is difficult to procure financing for certain types of properties. In some areas, it might be more challenging to obtain financing for condominiums, high-cost loans or unique structures.
Payment history is the largest contributing factor toward a borrower’s credit score. Therefore, a borrower with high credit scores is perceived to have less risk than a borrower with low credit scores. While credit scoring consists of a borrower’s current and previous payment experiences, there is no guarantee of a borrower’s future payment performance. However, credit scoring data that stems from a borrower’s payment history and other items are among a lender’s best indicators for measuring certain risk.
Higher credit scores are a win-win for borrowers and for lenders, as borrowers with higher credit scores generally receive more attractive mortgage interest rates.
Contact Equifax, TransUnion and Experian several months in advance of applying for a home loan to obtain details about ordering a credit report and credit scoring information.
Unless a home buyer has more than enough income to qualify for a mortgage loan, it makes sense to eliminate accounts with minimal balances. With fewer dollars being allocated to pay monthly debts, a borrower might be eligible for a higher mortgage approval amount.
Borrowers who plan to buy a home should remember to retain all of their income documents. Instead of presenting W-2’s and a 1040, a borrower should be prepared to furnish a mortgage lender with a completed tax return that includes all of the schedules.
Generally, a mortgage loan is funded within 60 days of the original application. However, additional time might be needed in some circumstances. While a mortgage loan is in process, a borrower should avoid making any purchases that require additional financing. Adding new payment obligations for cars, furniture, credit cards or appliances could impair or eliminate the borrower’s opportunity to receive the desired funding amount to buy a specific home.
Based in Conshohocken, PA, Perennial Funding offers courteous and professional support for borrowers who are seeking to buy a home or to refinance an existing mortgage loan.