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Most of us dream of having a home we could call our own but saving up for one is not always easy. It’s a good thing home mortgage loans are offered in Phoenix, Az but not everyone qualifies to avail. What are the factors lenders take into consideration when granting a mortgage loan?
According to Navy Federal Credit Union, lenders look at several factors which include:
Credit score: This is a reflection of how well you manage money and debt. Many lenders require a score of at least 700. At Navy Federal, we consider your banking history with us as well as your credit score, enabling us to provide more loans to more borrowers.
Debt-to-income (DTI) ratio: This is a comparison of your monthly debt, including the new home, to your monthly income. Lenders prefer borrowers with low DTIs because it means you’re more likely to be able to afford your monthly payments.
Employment history: Job stability of two years or more indicates that you have a stable income and can pay off debt.
Personal assets: Lenders like to see that you’re conscientious about setting aside money into savings and retirement accounts, as well as investments. Already own a home, property or other collateral, like a car, also may be a plus.
But what really is a home mortgage loan? A mortgage loan or simply mortgage is defined by investing answers financial directory as a loan in which property or real estate is used as collateral. The borrower enters into an agreement with the lender (usually a bank) wherein the borrower receives cash upfront then makes payments over a set time span until he pays back the lender in full.
Paying for home mortgage loans take as long as 15, 20 or even 30 years and it is important to look for the right home mortgage loan experts in Phoenix, Az who you will be dealing with for the long haul.
Nerd Wallet says finding a mortgage lender involves more than just getting the best home mortgage rate; you want to work with the best mortgage companies in Phoenix, Az, staffed by professionals who will guide you through the process.
Get your credit score in shape. The higher your credit score, the more bargaining power you’ll have.
Know the mortgage lending landscape.
Get pre-approved for your mortgage. Boost your chances of having your offer accepted by getting preapproved.
Compare rates from several mortgage lenders. You can search for the best mortgage loan quotes online.
Ask the right questions and read the fine print. Find out about requirements and fees, including costs beyond principal and interest payments.
Talking to a mortgage officer in Phoenix, Arizona is one of, if not your best option, it is also wise to increase your chances of getting approved by following these 6 Tips to Get Approved for a Home Mortgage Loan from Money Crashers:
1. Know Your Credit Score
Credit scores and credit activity have a major impact on mortgage approvals. According to the Home Loan Learning Center, a large percentage of lenders require a minimum credit score of 680 (620 for FHA mortgage loans) – and if your score falls below 680, lenders can deny your request for a conventional mortgage loan.
2. Save Your Cash
Requirements for getting a mortgage loan often change, and if you are considering applying for a home loan in the near future, be ready to cough up the cash. Walking into a lender’s office with zero cash is a quick way to get your home loan application rejected. Mortgage lenders are cautious: Whereas they once approved zero-down mortgage loans, they now require a down payment.
However, down payments aren’t the only expense you must worry about. Getting a mortgage also involves closing costs, home inspections, home appraisals, title searches, credit report fees, application fees, and other expenses. Closing costs are roughly 3% to 5% of the mortgage balance – paid to your lender before you can seal the deal.
3. Stay at Your Job
Sticking with your employer while going through the home buying process is crucial. Any changes to your employment or income status can stop or greatly delay the mortgage process.
Lenders approve your home loan based on the information provided in your application. Taking a lower-paying job or quitting your job to become self-employed throws a wrench in the plans, and lenders must reevaluate your finances to see if you still qualify for the loan.
4. Pay Down Debt and Avoid New Debt
You don’t need a zero balance on your credit cards to qualify for a mortgage loan. However, the less you owe your creditors, the better. Your debts determine if you can get a mortgage, as well as how much you can acquire from a lender. Lenders evaluate your debt-to-income ratio before approving the mortgage. If you have a high debt ratio because you’re carrying a lot of credit card debt, the lender can turn down your request or offer a lower mortgage. This is because your entire monthly debt payments — including the mortgage – shouldn’t exceed 36% of your gross monthly income. However, paying down your consumer debt before completing an application lowers your debt-to-income ratio and can help you acquire a better mortgage rate.
5. Get Pre-Approved for a Mortgage
The pre-approval process is fairly simple: Contact a mortgage lender, submit your financial and personal information, and wait for a response. Pre-approvals include everything from how much you can afford, to the interest rate you’ll pay on the loan. The lender prints a pre-approval letter for your records, and funds are available as soon as a seller accepts your bid. Though it’s not always that simple, it can be.
6. Know What You Can Afford
Don’t let lenders dictate how much you should spend on a mortgage loan. Lenders determine pre-approval amounts based on your income and credit report, and they don’t factor in how much you spend on daycare, insurance, groceries, or fuel. Rather than purchase a more expensive house because the lender says you can, be smart and keep your housing expense within your means.
Do not get discouraged by the tedious process of securing a mortgage loan in Phoenix, Arizona. When done, the reward is lasting. That property you own could be a legacy you pass on to your children and your children’s children.
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