Qualifying for a Home Loan

Lenders have two key factors they give very heavy weight to:

• Your ability to repay
• Your willingness to repay

How Do They Know If I Can Repay My First Home Mortgage

To determine your ability to repay the mortgage, lenders do what’s called a Verification of Employment (VOE). Many times this is the underwriter or her assistant that actually calls your employer on the phone. They ask simple questions like when you started with the company, your position and wage information. Employers are used to the drill. Larger corporations have automated systems for doing this.

Underwriters like it when you have been employed for at least 2 years at the same place. At the very least, you need 2 years in the same line of work.

At times, underwriters have been known to do a VOE 2 times. Once at the point of application, the other just before you close on your home loan. So try not to make any changes in employment during the mortgage process.

You may wonder why they do this 2 times. Remember they have the checkbook. Most all underwriters treat your transaction as if they are the one loaning you the money. So they make sure you have the ability to repay when qualifying for a home loan. Thus they verify employment to know you will be able to make the payments.

How to Determine Willingness to Repay When Qualifying for a Home Loan

Now for the second part. The underwriter can determine your willingness to repay by how you’ve handled the payment of previous loans and/or rent. Let’s first look at how you paid your rent.

The loan processor will be required by the underwriter to do a Verification of Rent (VOR). To do this she contacts your landlord, verifies in writing how long you rented there, how much the rent was and did you have any late payments.

What’s being looked for here is if you have ever been over 30 days late on the rent. If not, good. If you have, this will be looked at closely. Like how many times and how long ago it occurred.

Another way your willingness to repay is determined when qualifying for a home loan is with your other lines of credit. This is shown by your credit report and other monthly bills you may have had like utilities, student loans, etc.

Now all underwriters realize that you will have a much greater tendency to pay your mortgage payments when buying a house as opposed to renting. Not many of us want to live on the street so, any sane person will be sure to pay their mortgage payments more so than rent.

Please keep in mind each person is looked at on a case by case basis.

Although it may feel very personal, they are not discriminating against you if you get denied. They must be sure that when qualifying for a home loan you can meet on a timely basis over several years. Nobody has a crystal ball to foretell the future, but this is as close at it comes.

I have a few different ways I describe this process. First I want you to think like an underwriter. They almost look at you like a drug lord and a terrorists. (Not really of course) But they have to view you with a suspicious eye when qualifying you for a home loan.

Then the next thing is they want to see inside your underwear drawer.

They need to know almost ever intimate detail about you. So don’t take it too personal, everybody gets the same treatment.

Now if you plan to put down a small or zero down payment, that’s another story. I talk about low down payment programs elsewhere in this website.

So then, when qualifying for a home loan you now have the 2 most important factors lenders look at.

What is the best program to check my eligibility with? First Time Home Buyer Programs gives an excellent explanations of the various programs to choose from.

Can I qualify for a zero down home loan? The page Zero Down Home Loans gives and awesome descriptions of these loans what you need to do to qualify.

Where can I go to have my questions answered? Have a Question is a cool place to see what others have asked and answered. Or to ask your own question. Go ahead....pick my brain!

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