4 Important Factors to Mortgage Loan Lenders

Moving into a new house is an amazing feeling. That being said, many buyers need to obtain a loan before visiting a real estate company. Statistics show that 32% of people purchasing homes are doing so for the first time. Considering that, it\’s understandable to be unaware of the factors determining whether or not you can obtain a mortgage. With that in mind, here are four factors that affect your ability to obtain a mortgage loan.

  1. Current Amount of Debt

    Lenders are going to want to know about your current debts. In the mind of many lenders, someone who is carrying a lot of debt is going to be seen as a risk. On the other hand, another person with more manageable debt might have an easier time obtaining a loan. There are often ratios used by lenders while looking into debt totals. In most cases, lenders are looking for someone with a debt to income ratio under 36 to 43%. If someone has debt that is higher than 43% of their income, this looks risky to most lenders which means they might not approve your loan request.
  2. Credit Score

    Another aspect that lenders often check is your credit score. Looking at your debt to income ratio shows lenders your current financial situation. However, a credit score helps to show lenders your financial stability throughout the past. Of course, lenders are going to want to loan money only when they feel relatively assured it\’s going to be paid back. In certain cases, a buyer might be able to qualify for a subprime mortgage loan. However, many feel it\’s advantageous to lower their credit scores before being stuck in a disadvantageous subprime credit contract.
  3. Down Payment Amount

    Besides your credit, lenders will focus on other aspects of your finances. Another determining factor in the mortgage approval process is having a down payment ready. A down payment is seen as a sort of preparedness step. For instance, the buyer has a $10,000 down payment ready looks far more prepared than someone with $1,000 set aside. Minimum down payment percentages will vary based on a number of factors. While one lending institution might accept a 4% minimum payment, another might require a different amount. It\’s wise to set aside as much as possible for a down payment before seeking to obtain a loan.
  4. Employment History

    It\’s incredibly important for lenders to find out about your employment history. This isn\’t done for the purpose of being invasive. Instead, lenders want to know that you\’re someone with a steady employment history. After all, no one wants to lend large amounts of money to someone who seemingly has little chance of being able to pay it back. Therefore, you\’ll want to present a steady employment history. Most lenders look for someone with at least two years of steady employment. If you have a steady employment history, you\’re that much closer to being able to visit a real estate company.

In closing, there are several important factors that go into qualifying for a mortgage loan. Statistics gathered from 2016 found that there were 560,000 homes sold throughout the United States. After obtaining loans, many smart buyers partner with agents from a real estate company. In fact, statistics show that 78% of buyers felt that their respective real estate agents were very useful sources of information. The mortgage qualification process can sometimes seem daunting. However, lenders utilize these factors to help ensure they\’re making a safe investment.