Three Things You Need To Know Before Getting A Home Loan

Posted 7 October 2016 1:37 PM by admin

If you’re considering buying a home, or refinancing an existing mortgage you want to be ready when you meet with your Embrace Mortgage Specialist. Here are three things you should know.

1. Your credit or FICO score - Designed to provide lenders with an objective assessment of a potential borrowers ability to repay, the FICO Score was introduced by Fair Isaac and Company. You actually have three credit scores, one from each of the three major credit bureaus, Experian, Equifax, and TransUnion.

The information contained in your Credit Report is intended to give the lender insight into your borrowing and repayment history. The reports look at the amounts owed on all types of accounts, as well as, how many have balances, how much of the total credit line is being used and the remaining amounts due on installment loans. Payment history accounts all credit cards, retail accounts, installment loans and mortgage loans are also considered. Bankruptcies, foreclosures, law suits, garnishments, public records, items in collection, liens, judgments and late or missed payments have a negative impact. The length of your credit history also weighs on your score. A longer credit history is a positive in determining your score. Other factors include, how long accounts have been open and how long has it been since you used them. Other influences include the kind of credit accounts you have and how many of each type. New credit accounts also impact your scores. How long since you opened a new account, how many recent requests for credit you’ve made, length of time since credit report inquires were made by lenders and  whether you have a good recent history following past payment problems are also influences.

2. Your Income & Assets- Your Embrace Mortgage Specialist will need  the following to determine your income:

  • Copies of W-2s for the last two year
  • Copies of paycheck stubs for the last 30 days
  • Copies of checking and saving account statements for the last two months
  • Copies of statements for, IRA’s, CD’s, money market fund, stocks, 401k, profit sharing, etc.
  • Employment history for the last two years
  • Residential history over the last two years, with name, phone number, address, and account number of landlord, copies of rental property lease or if you owned a home previously the name of the mortgage company and mortgage loan information
  • Commissioned or bonus income. If 25% or more of base you must have tax returns
  • Any assets used for down payments, closing costs, and cash reserves must be documented as well. 

3. What You Can Afford , Your Debt to Income Ratio.

Your debt-to-income ratio is all your monthly debt payments divided by your gross monthly income.  This number is one way lenders measure your ability to manage the payments you make every month to repay the money you have borrowed.

To calculate your debt-to-income ratio, you add up all your monthly debt payments and divide them by your gross monthly income. Your gross monthly income is generally the amount of money you have earned before your taxes and other deductions are taken out.  Most lenders look for a Debt to income ratio around 43%.

Whether you’re buying or refinancing, Embrace Home Loans has the answers you’re looking for and the information you need to make the right choice. 

 

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