Your credit history and your history of employment are both major factors that affect your capability of obtaining a mortgage loan. In deciding whether you are a good candidate for a mortgage loan, your lenders will analyze your credit report including your past credit history and credit score, as well as your current income and your past earnings. This process is called underwriting and it gives them an overall view of your financial ability to repay your loan.
Mortgage Lenders Review Credit History
Analyzing your credit history is at the top of the list when deciding how stable you have been in the past and present. They will obtain a copy of your credit report to see a clear view of what past due balances you have, your past payment history, your credit score, the amount of outstanding credit you have, as well as the amount of credit you have available.
Before visiting your prospective lender, obtain a copy of your credit report and make sure that there are no surprises, and that you can explain everything and answer all questions they may have, in detail. If your credit has a few blemishes, work to repair your score and pay off what you can before showing up on the doorstep of a prospective lender. This step can possibly save you a lot of time and money.
Mortgage Lenders Review Income
Your income and history of employment are very crucial details to prospective lenders. They look at not only how much you are currently making, but also your past history of employment with the same company, and your history of staying in the same field of work. It is important not only for you to verify your income through W-2 statements and/or tax returns, but it is also important for you to show a history of commitment to follow through on your employment and career obligations.
Usually lenders look at your income and job history for the last two years, yet if you have been stabilized in your job for longer, it is a good idea to bring all appropriate documentation.
Your 'debt-to-income ratios', the amount of your mortgage payments and total debt payments as compared to your income, not only impacts your ability to secure a loan, but can also impact your loan cost. The higher your debt-to-income ratio, the higher the lender's risk, therefore the higher the interest rate and fees will be.
If you are thinking about taking out a mortgage loan, you may want to wait until you have been with your present employer for two years, or wait for your upcoming raise. It might take a little patience, but your pocket book with thank you later.
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Carrie Reeder is the owner of ABC Loan
Guide, an informational website about various types of loans.