Some lenders evaluating a credit application are not tied down by strict industry standards. However, today, you can get by with much higher percentages, if you can show that you can make the payment. For pre qualification purposes, the maximum housing ratio of 28% and a maximum debt ratio of 36% (28/36) used to be national guidelines. If these ratios are too high, lenders may decide to deny the application. Debt ratio is determined by the sum of your total monthly mortgage payment and other fixed monthly debt payments divided by your total monthly income. Housing ratio is determined by your total monthly mortgage payment divided by your total monthly income. The size of the mortgage that can be afforded monthly, can estimated through two essential ratios: housing ratio and debt ratio. These scores are viewed as very accurate predictors of future delinquencies. Therefore, the better the score, the easier it is to pre qualify. The higher the score, the less likely there will be a default on a mortgage. FICO scores range from 400 to 900, with 900 being the best score. The credit score many lenders use is the FICO score. 10% Recent Credit Inquiries - suggesting that you are seeking additional loans or credit cards.10% Mix of Credit - car loans, charge cards, mortgages, etc.15% Age of Credit - of all credit cards and charge accounts.30% Amount of Credit Outstanding - balances on your credit cards and other loans compared to the credit limits for those loans.35% History of Past Payments - on all types of credit.Factors that determine your credit score vary from company to company, but generally include: The credit score is based on a statistical analysis of your credit history. Credit bureaus collect information from retailers, banks, finance companies, mortgage lenders, and a variety of public sources on all consumers who use any type of credit, including credit cards, car loans, mortgages, personal loans, and charge accounts. Lenders order mortgage credit reports from local credit bureaus, which gives individual credit history and scores. For those who are self-employed, considered if you own a 25% or greater interest in the business that employs you, lenders will look at profitability and cash flow of the company and also personal income.Ĭredit history and scores can play a big role in the pre qualifying stage in the mortgage process. For salaried employees, lenders look at job history for at least the past two years. Stability of income is a very important factor to mortgage lenders when they pre qualify you. A few job changes with increases in salary and responsibility are not frowned upon.
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Ideally lenders like to see an employment history of 2+ years with the same company, or in the same line of work. Unemployment is one of the two largest causes of mortgage foreclosure, the other being divorce. To pre qualify you, lenders look at the following information: Within the context of these standards, some lenders choose to be lenient and flexible, while others are strict. Most lenders use national guidelines to determine the maximum amount that they will lend. The first step in the mortgage process is pre qualifying, which will determine how much a lender will lend you.
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The form will take less than 2 minutes to fill out.
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Pre QualifyĬlick here to get pre qualified for a mortgage. You will be able to know how much you qualify for, or if you do not automatically pre qualify, you will be given advice on what you can do to get qualified for the amount you are looking to borrow (increase your credit score, apply for special loan programs, etc.). Fill out one of the forms below in order to get pre qualified.