Qualifying for a loan

Applying for a loan: There are many criteria lenders looks for when a person applies for a loan. Not all lender have the exact requirements  when deciding to loan money but many lender use similar guidelines to qualify a person loan worthy. Here are some common guidelines that lenders use when evaluating loan applications:

Ability to pay the loan back: You work history, earning power, length of time in your industry are all factors lenders look at when deciding to lend you money.

Credit history: How much you owe, if you pay on time, how you manage your debt. Lenders will review your credit history to get an idea of your capacity to pay back their money. They look to see if you have bankruptcies or liens against you, or if you have been reported for collection.

The worth of the property: The property will be appraised to make sure it is worth the risk. They want their money back and want to assure that the property is worth now and the chances of increasing or decreasing tomorrow.

Getting the Loan Approved:When you are told you have loan approval that means you have successfully qualified for the loan  to buy your property. Having an approved loan starts the closing process on the house. A formal letter of approval, commonly called a commitment letter, from the lender guarantees in writing that they will lend you a specific loan amount. It also details the conditions of the loan. The letter will address: Amount of loan, Term of loan ,Loan origination fee, Type of loan and program,  Loan origination fee. Points that may be applicable to the loan, How long you have to complete the closing-related activities and transactions,  Other costs(neighborhood association dues, special assessments, etc.)

  What could go wrong?

           A poor credit score indicates that the home buyer has not established a good credit history. This should be to verified that the credit information issued to the lender is accurate. Obtain a copy of your credit report yourself from your local credit bureau. Look for bills that have been paid or that are not yours. Identity theft has ruined many a credit report ask your lender  what steps you can take to restore your credit to an acceptable level. Rebuilding your credit may only delay your home purchase for a short time.

            Not enough income - Your ability to pay off a loan depends on your current earnings and your future income potential. Lenders may decline a loan if the home buyer does not meet the income requirements or cannot show proof of stable income. It is to your advantage to establish a consistent and stable income. Too much debt - If your existing debts (credit cards, car loans, student loans) exceed the debt-to-income ratio for the loan, determine if you can pay off some of your debts before you apply for a mortgage. If you have credit cards you don't use, cancel them. Inactive credit cards are still considered potential debt. For more assistance with debt consolidation or other credit needs, contact a HUD Housing Counseling agency.