What Do Mortgage Lenders Really Look For?

Before offering you’re a home loan, mortgage lenders want to be certain that you will pay them back. This often involves looking at your finances and then assessing whether they can trust you.

 

But what exactly is it that mortgage lenders look for? Here are some of the main factors that lenders like to look for before approving a home loan.

 

A good credit score

 

Much of the decision as to whether to give you a mortgage will be based on your credit score. This score is largely based off your ability to pay creditors on time. If payments regularly bounce and you have to pay late payment charges, you can expect this to damage your credit score.

 

Fortunately, if you’ve got into bad habits of not paying bills on time, you can rebuild your credit score using a credit builder loan. You should also check that all your accounts address details match up as this can affect your credit score too.

 

If you’ve had a financial setback, this article can help.

 

Proof of steady income

 

Mortgage lenders like to see that you’ve got a steady income coming in that is enough to pay off your mortgage repayments.

 

If you’ve been job-hopping a lot recently, you may find that this works against you – being in a steady job for a minimum of a year will look better. If you’re self-employed or work a job in which your paychecks vary from month to month, you may have to provide two years of bank statement to ensure that there aren’t too many long periods of low income.

 

Minimal debts

 

Having lots of other debts could show that you’re living beyond your means.

 

Some mortgage lenders may not care if you can show that you’re able to pay off all these debt repayments on time. Any good lender, broker or service like Evolve Bank & Trust will detail everything you need to take care of. Just to be safe, you may want to work on trying to pay off some of these debts before applying for a mortgage so that it doesn’t look so concerning.

 

Minimal unexplained credit

 

If unexplained large sums of money keep entering your account, this could also raise red flags for lenders.

 

This could be a sign of money laundering and lenders won’t want to associate themselves with you. Make sure that you have an answer for any unexplained deposit (lenders are likely to look at earnings in the last few months).

 

A suitable property

 

Mortgage lenders may also send someone out to appraise the property.

 

In the case of premium real estate, they’ll want to know that the property really is worth the amount you say it is. You should also be careful of property that is in poor condition – if it need restoring, lenders will want to know how much you plan to spend on this restoration process.

 

When it comes to premium property and fixer-uppers, you may be better off looking into specialist lenders. This is similarly the case when buying property to rent or buying property to do up and sell.

 

A suitable age

 

Your age is also a factor that lenders may consider.

 

Youth has its advantage when applying for a mortgage – lenders may allow you to pay the loan off over a longer period, resulting in smaller monthly repayments. If you’re over 50, mortgage lenders may only offer short-term mortgages that require you to pay more each month. If you’re over 65, you may even struggle to find a lender willing to take you on (although there are lenders out there that take people on past this age).

 

Use these tips to get approved for a home mortgage.

 

Ken Boyd

Author: Cost Accounting for Dummies, Accounting All-In-One for Dummies, The CPA Exam for Dummies and 1,001 Accounting Questions for Dummies

(email) ken@stltest.net

(website and blog) https://www.accountingaccidentally.com/