Whether, one seeks to take advantage of a mortgage, as a component of financing a new home, or, decides, it makes sense, to refinance his residence, for a variety of reasons, including, personal finances, getting a better rate, etc, it is important to begin the process, understanding, some of the factors, which, often, become major considerations, of the qualifying process. Since, for most of us, our house, represents our single – biggest, financial asset, doesn’t it make sense, to take the time, and make the effort, to understand, and take advantage of, the best way, to achieve this objective. With that in mind, this article will attempt to, briefly, consider, examine, review, and discuss, 5 factors, which may impact, whether one will qualify, for these loans.
1. Overall debt: Lending institutions consider many factors, and, one of the key ones, is the ratio of overall debt, to earnings. If this percentage is too high, many will refuse to consider the candidate! These debts include, credit card debts, unsecured loans, other debts and obligations, etc. When one decides to proceed, examine this first, and try to pay – down, the overall debt!
2. Debt/ earnings ratio: There are only 2 ways to reduce this ratio/ percentage. One is to increase one’s earnings/ income, and the other, is reducing debts. For most of us, the second approach, is the one, easier to address, in a controlled, timely way!
3. Housing debt/ earnings ratio: There are two ratios, lending institutions, nearly always, consider and examine, thoroughly. These ratios are not considered recommendations, but, rather, are generally, firm/ strict limits! In addition to being a necessity of acquiring a mortgage, one should seriously, realize, if this is too high, how might anyone, be comfortable, with the monthly, carrying charges, of home ownership!
4. Credit Rating; debt repayment: How you have handled previous, and/ or, existing debts, is a significant consideration! If you have demonstrated, you are responsible, in this regard, it’s a positive action, as opposed to a less than, stellar performance, in the past! There are a few credit agencies, which lenders use, and the Credit Rating, one earns and reserves, is a significant factor!
5. Past, present, and future (foreseeable) earnings, and employment/ job security: Lenders examine your past and present earnings, and whether, you are gainfully employed, or self – employed, and the prospects of maintaining sufficient earnings, is favorable! The more confident, you make them, the better you chance of qualifying for a mortgage.
Securing a mortgage, and the most favorable one (with the best terms), depends on many factors, as mentioned above. The better one prepares, and addresses, these, up – front, the easier, and least stressful, the process!