Columbus home buyers may find the mortgage application to be an intimidating process, one that is only slightly less stressful than an IRS audit. But fear not! Mortgage lenders actually want to lend you money, because that’s how they make money.
The exact criteria for mortgage loan approval will vary depending on the lender and type of mortgage. However, there are some common factors most lenders look for:
1. Consistent work history. This includes the length of time at your current employer, as well as your time in a specific industry. Usually two years is a sought after work history, but extenuating circumstances may mitigate this – and school or college may actually count towards your work history!
2. Good financial records. Prepare a file with copies of your recent two years income tax returns, last three months of bank statements, and retirement account statements. Have documentation ready to support any large or unusual cash deposits.
3. Good savings habits. This includes automatic deposits to a savings account, regular 401 contributions, and so on. Your deposit amounts do not have to be large, but they are looked upon favorably if they are made consistently.
4. Clean credit history. Ideally, no late payments in the past 12 months, and no outstanding collections. Credit score requirements vary; FHA mortgages allow FICO scores in the 600’s, while most conventional mortgages prefer scores over 700. See our blog post on credit facts for ways to monitor and improve your credit!
5. Minimal debt. Your debt-to-income ratio is closely examined in order to determine affordability. Car payments, credit card debt and student loans impact this ratio. However, any debt that is within eight or nine months of being paid off will usually not be counted against you.
6. Down payment. While FHA mortgages allow as little as 3.5% down, remember that you will be required to pay mortgage insurance for the life of the loan. A conventional mortgage requires at least 5% down. Also, mortgage insurance is still required if you have less than 20% down – but with a conventional loan, you will have a future opportunity to waive it and save more money each month. See our blog post about down payments and mortgage insurance for details!
Your Complete Home Buying Resource
Before you speak to a lender, contact us! We will refer you to trustworthy mortgage lenders who will find the best mortgage loan for your needs. Remember – lenders can only treat you as a “customer” but we are your “fiduciary” (meaning a person legally trusted to work in your best interests.)
We also encourage you to download our FREE e-book for expert home buying tips and strategies!
As your Exclusive Buyer’s Broker, we serve your best interests at all times. Unlike real estate agents and brokerages who represent sellers, as an Exclusive Buyer’s Broker, we only represent you, the buyer, getting you the best price and terms with no conflict of interest at all times. Understanding this distinction could literally save you thousands of dollars not only on on the purchase price and terms, but also on seller concessions and home inspection issues, whether you are a first-time homebuyer or an experienced homeowner.
Contact us with your home buying questions! Remember, we are with you every step of the way…all the way home!
Andrew Show
Broker, CEBA, CEBA-M, CNE, CSP, ABR-M, e-PRO, GREEN
Buyer’s Resource Realty Services
Serving Metro Columbus, Ohio with Exclusive Buyer’s Agents
7100 North High Street, Suite 204, Worthington, Ohio 43085
614-888-4110 | 888-888-4110 Toll Free | 614-839-4110 Fax
