Qualifying For A Mortgage
In order to be eligible for a mortgage loan, the most important criteria that lenders consider is to have a satisfactory income-to-debt ratio.
Usually an income-to-debt ratio of 28/36 is considered as ideal for approving a mortgage loan. According to this ratio, a maximum of 28 percent of the monthly income can go for housing and a maximum of 36 percent of total monthly income of the borrower can be used for the purpose of making monthly mortgage payments. The debts usually considered under this include long term loans such as car loans, student loans and credit cards. Any deviation from the above ratio would require higher down payment to be made since the lender would determine the loan amount based on the ratio.
Another important strategy required in order to qualify for a loan is to have a stable income and a reasonable credit history. Often lenders require credibility about the repayment capacity of the borrower. Hence, late payments on rent, mortgages and credit card bills are closely studied before approving a loan application. Apart from this, a steady employment with a single employer for a minimum period of 2 years is an important criterion. However, there are certain other types of loans available for such type of borrowers.
A number of documents are required while applying for a loan. Some of these include social security number of the applicants, employment history for the past two years, complete residential address (including landlord details) for the past two years, most recent income statements, details of all loans and mortgage payments, complete details of all the deposit accounts such as stocks, savings accounts, deposits and bonds and completed sales contract signed by the seller and the buyer. Apart from these, the applicant also has to deposit money required for the purpose of closing costs.
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