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Monday, November 30, 2009
The four parts of loan approval
When getting approved for a mortgage loan, there are four main items that an underwriter will use to approve or deny your loan. They are: Income and Liabilities, Credit, Assets, and the Property. All are important and I'll describe how they are used below.
Income and Liablities: An underwriter will look at your monthly income and monthly debt (including the new house payment) to determine if you can afford the home. Typically your monthly debts can't exceed 41% of your monthly income. There are some exceptions to this, but by and large 41% is the max.
Credit: Credit needs to be above a 620 to get approved. However for the best rates credit should be over 740. Depending on your down payment, there are also higher score requirements too.
Assets: You'll need to have the down payment in a liquid account such as checking or savings. The seller can pay for your closing costs if you want/need them to. You'll also need 2 months worth of your monthly house payment as reserves. You won't use this money at closing, but the lender wants to see that you have some fall back money.
Property: The property has to appraise at or above the sales price. It also has to have a clean title and survey. For condos there are other requirements dealing with the HOA. These can be quite in depth so I'll leave that for another posting.
If you're thinking about buying it's good to have these things in mind so that you're fully approvable when it comes time to put a contract on a home. I'd be happy to help you find your next home or answer any questions.
Bill
billconover@america-lending.com
Income and Liablities: An underwriter will look at your monthly income and monthly debt (including the new house payment) to determine if you can afford the home. Typically your monthly debts can't exceed 41% of your monthly income. There are some exceptions to this, but by and large 41% is the max.
Credit: Credit needs to be above a 620 to get approved. However for the best rates credit should be over 740. Depending on your down payment, there are also higher score requirements too.
Assets: You'll need to have the down payment in a liquid account such as checking or savings. The seller can pay for your closing costs if you want/need them to. You'll also need 2 months worth of your monthly house payment as reserves. You won't use this money at closing, but the lender wants to see that you have some fall back money.
Property: The property has to appraise at or above the sales price. It also has to have a clean title and survey. For condos there are other requirements dealing with the HOA. These can be quite in depth so I'll leave that for another posting.
If you're thinking about buying it's good to have these things in mind so that you're fully approvable when it comes time to put a contract on a home. I'd be happy to help you find your next home or answer any questions.
Bill
billconover@america-lending.com
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