What Do I Need To Get a Mortgage?
When looking for a mortgage, the first thing you ask is what you need to get a mortgage. After learning what the requirements are, your first step is to find the mortgage lender who will offers the requisites that you can comply with. There are several lending institutions that extend mortgage loans. However, banks are normally the best lenders offering mortgage loans especially for refinancing. Here are some pointers that you need to know to understand fully what is needed to get a mortgage.
You Need Cash For A Down Payment
You need to save money for a down payment before you buy a home. Lenders are interested in your ability to put forward a down payment and in how much you could afford the total price of the house you want to buy. The amount you can put up is essential in computing the loan-to-value (LTV) ratio. Ideally, the ratio should be 80 percent or less. If your LTV is higher than 80 percent, you will have to pay for private mortgage insurance. 10 to 15 percent of a down payment is also a perfect idea to pay to have some equity in your house. Remember that mortgage lenders will demand proof that you have the money ready. Your bank statement could best support this.
Lower Debt-To-Income Ratio
Similarly, it is normal for lenders to require that your monthly expenses and your other monthly debts including car loans, student loans, and your credit card bills will not be more than 36 percent of your gross monthly income. They are interested in finding out the ratio to see how much you can afford. Dividing your gross income by the amount used to settle your monthly debts you can arrive at the figure. Multiply by 100. Taxes and property insurance are included in the total tally of an estimated mortgage payment.read post here!
Ideally, you need a credit score of 720 and more to benefit from favorable interest rates. If your score falls below 720 down to 675, you do not qualify for the best rate but will still be eligible for a good loan. You will qualify for subprime rates if you score lower than 620. That means it would be difficult to secure a loan that carries a low interest rate. As always, your credit score is taken seriously by all lenders. It plays a vital role when it comes to borrowing. Before you start shopping for a loan, it is important that you review your credit report.
Study it carefully to find out if there are any errors. It is important to have it checked three or six months before you apply for a loan mortgage. This will give you ample time to employ some corrective measures in case there are errors in a credit report. There should be no problem in getting your credit report as you are entitled to it once a year for free. If your credit score is not as perfect as discussed above, take the time to improve it before applying for a mortgage. A good credit score would mean a low interest rate and a good bargain when it comes to other closing costs and down payment requirements.
Your job history is also important in determining whether you qualify for a loan. Lenders will look more favorably at someone who has kept the same job for two or more years than someone who has changed positions. Your employment history is similarly vital in qualifying for a loan. It is common practice to give more preference to borrowers who have remained in their jobs for at least two years than the borrower who keeps on changing employers.see page at http://blog.credit.com/2016/02/how-to-get-a-3-down-mortgage-137748/
However, if you can explain the change in career for reasons like an increase in pay that should work in your favor. If you are self-employed, lenders normally require additional information like income tax returns or documents from accountants about your finances.When you are well prepared to meet the above requirements, then it is the perfect time to shop around for your dream house in a mortgage plan. By that time you already know the answer to the question: what do I need to get a mortgage?