Applying for a home mortgage or a car mortgage is a big deal, especially for starting families. But unless you are born with a silver spoon in your mouth, you can’t pay the house in cash or get pre-qualified because of the millions you own in company stocks. You go the old route of applying for a loan, waiting to be approved for it, and setting up a payment scheme.
The first thing that you need to look at in a mortgage lender is the NMLS license in California or in whichever state you’re applying for a mortgage. You have to make sure that you’re meeting and talking with someone who’s licensed to lend you money. This will protect you from any future fraudulent transactions and lawsuits that may arise from the agreement. It will also ensure that you get the best deals and fair interest rates for your loans.
If you’re concerned about your ability to qualify for the loans, you need to first fix your financial background and history before submitting your application. These are the things that mortgage lenders look at when evaluating your ability to repay the loans:
A credit score in the U.S. usually ranges between 300 and 850. This means that you must have a score of 700 or above to qualify for a good credit rating. A score of 800 or above is considered excellent, although most credit ratings fall between 600 and 750. A low or poor credit score is in the vicinity of 500 to 679.
Credit card companies, mortgage lenders, and banks consider your credit score to decide to approve your loan application and for what interest rate. Your credit rating underscores your ability to repay your loans. It is affected by your payment history, your filing of bankruptcy (if there is any), your total debt, the number and type of credit accounts you have, and your credit utilization rate.
Lenders will ask for your bank statements in the last two months. They want to make sure that the money you say you have in those accounts is actually there. That will help them determine your ability to pay the down payment. This is why it’s important to save money months before you plan to apply for a mortgage.
The lenders will also review if there is a pattern of saving in your accounts—if there’s money left in the account after you have paid your monthly dues. They will also scrutinize and verify any large amount of withdrawals and deposits from your accounts.
Do not be surprised if the mortgage lender will interview your boss about your job and position in the company. Have you been working in the company for long? Has your income steadily increased from the time you joined the company up to now? Just imagine: Are you willing to lend money to a friend who hasn’t been able to hold a job for even two months? Mortgage lenders are looking for stability.
Income Tax Returns
The lenders will ask for two years worth of income tax returns. This will allow them to see dropping or falling income. If your income is dropping, you might have to explain yourself. This will also show that you are paying your dues to the government. Never submit bogus tax returns because the mortgage lenders have ways of knowing if you’re trying to hoodwink them.
The key to qualifying for a loan is to maintain a good credit score, save a portion of your salary, have a good standing with your employer, and pay the correct taxes. If you divert from these financial activities, you will lose whatever qualifications you have for securing a loan. Being honest in your financial records will bring you closer to your dream home or car.