When applying for a mortgage, several financial factors are evaluated to determine your eligibility and terms of the loan.⬇️
1. Income
✨Steady & Consistent Income:
- Lenders look for a stable and sufficient income to ensure you can make monthly mortgage payments. This includes your salary, bonuses, commissions, and any other sources of income like rental properties or investments.
✨Debt-to-Income Ratio (DTI):
- This tool compares your monthly debt payments to your gross monthly income. A lower DTI ratio will equal a higher mortgage approval, as more of your income can be considered towards your monthly mortgage payments.
2. Liabilities
✨Current Debts:
- Liabilities such as credit card debt, student loans, car loans, and other outstanding loans are considered. High levels of existing debt can negatively impact your DTI ratio, making it harder to qualify for a mortgage.
✨Regular Payments:
- Consistent and on-time payments show financial responsibility, which can positively influence your mortgage approval.
3. Credit
✨Credit Score:
- A higher credit score indicates lower risk to the lender and can result in better mortgage terms, including lower interest rates. Although a higher credit score will give you access to the best rates, there are mortgage products available for people with all types of credit scores.
✨Credit History:
- Lenders review your credit reports to assess your history of repaying debts. A long history of timely payments and low credit utilization positively affects your credit score and mortgage approval chances.
4. Assets
✨Down Payment:
- The amount of money you can put down towards your new home affects the loan-to-value (LTV) ratio of the property. A higher down payment can lower your LTV, reducing the lender’s risk and potentially leading to better loan terms.
✨Reserves:
- Having sufficient savings or liquid assets to cover mortgage payments and ongoing costs to homeownerships, provides more assurance for the lender. This acts as a safety net and can make you a more attractive client.
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