Buying a home is one of the most significant and stressful decisions you will make in your life. You will need to do your homework and be prepared. Make sure you know what the lenders are talking about, so know the meanings of words like fixed rate, interest rate, and the type of loans they offer for homebuyers. Like I said do your homework, don’t just walk in there and agree with everything they say or want.
Here are the FIVE “C’s” that lenders look for when going over your application.
- Credit Score/Report: This is probably the most important item the lenders will consider when going over your application. They will review payment history; no late fees would be nice. Your Debt to Income Ratio- don’t want to owe more than you make. Age of your credit history, how long have you had particular credit and the payments. Don’t open new accounts or close any accounts while applying for a home loan.
- Capacity: What is your ability to pay the mortgage? Don’t switch jobs four months before you apply, make sure you have been on your job at least two years. If not on a job for two years, you will need to show them you are capable of paying.
- Capital: The more money you have, the more the bank will want to work with you. Also, investments and retirement accounts look real good to lenders. Try to have more downpayment than required.
- Conditions: This one you can’t do much about, but it still will affect your loan. Lenders will base the loan on the housing markets and economy. Important to check are the premium variable rate home loans, offered at NPBS and other leading lenders, as it adjusts as the market fluctuates. They want to see how outside influence impact the value of the property.
- Collateral: Lenders want to know what they can take from you to pay the mortgage.