When qualifying for a home loan, underwriters look at two very important things. Below I'll discuss these items and how they affect your qualification. Put these two important factors in place and success rate rises significantly!
Here are the two key factors lenders give very heavy weight to:
With so many lenders to choose from, you want to be sure and select the right one.
How do lenders insure these two items?
Below I'll discuss how they verify these so you can be sure to have these in place for success.
You may say "yes." But the lender wants to determine your ability to repay the mortgage. They do what is called a Verification of Employment (VOE). Many times this is the underwriter or her assistant that actually calls your employer on the phone.
They really call my employer? Yes, they do! So whatever to say on your loan application, they will verify.
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.
But you can be sure, they will call and verify your earnings. So what do they want? Well, of course their checking to see if you make enough money to pay back the loan.
They are also looking at something else when they call. What is that?
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. That's why they want to know your employment dates.
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 first home mortgage process.
Why do they do this twice? Remember they have the checkbook. Most all underwriters treat your transaction as if they are the one loaning you the money personally.
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 and check to see if anything has changed.
What about the willingness factor? How do they know this about me? Let me explain this next.
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.
Yes, they check how timely you are in paying your rent. Underwriters feel this reflects your willingness to pay. If you're good at paying your rent, then you will be good at paying the mortgage.
Now let me break that down a little bit. What they're really checking is if you have ever been over 30 days late on your rent payments. If not, good. If you have, this will be looked at closely. Like how many times and how long ago it occurred.
So, if you have been a few days late, that may not hurt you. But if you have been 30 days late, that's a very different matter.
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 the first time mortgage payment 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.
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. Below I'll provide a link so you can read more about them.
So then, when qualifying for a home loan you now have the 2 most important factors lenders look at.
Get these two in line and approval success is greater.
What is the best program to check my eligibility with? Home Buyer Programs gives an excellent explanations of the various programs to choose from.
Remember I said I would give you a link to understand the zero down home loan option? The page Zero Down Home Loans gives an 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!
Go to House Buyer Solutions Home Page.
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