Are you looking forward to purchasing a house? Are you in planning stages of home purchase? Regardless, what stage you are at, it would be in your best interest to understand what banks search for when evaluating your loan application. The mortgage company would be required to ensure you were most likely to repay the home loan as per the terms and conditions of the mortgage agreement. While making the assessment, the mortgage company would consider a couple of important aspects pertaining to your past and present financial scenario.
- Credit score
The higher you credit score, the better chances of you availing loan from the bank or mortgage company. On the other hand, low credit score or bad credit score would pose a bad image of your credit history to the bank or moneylender. The credit score would be calculated through payment history, credit utilization and length of credit history.
With respect to the banks, how much you earn would not be as important as your monthly income pertaining to the total monthly housing expense. You do not require high monthly income for qualifying to avail home loan. However, your income would definitely influence the loan amount for which you would be approved.
- Existing loans
In event of you having long-term or ongoing debts for student loans or car payments, the lender would be sceptical to provide you with loan. They would consider your inability to make such payments, affecting the ability to repay the mortgage amount. In case, you were having existing loans, it is not a bad thing. However, you should consider keeping timely payment track. In case, your bank balance goes to nil in the end of the month after making payments, it would affect your eligibility for loan.
- Down payment percentage
If you were able to pay around 20% of down payment, it would increase your chances of acquiring loan.