What Mortgage Brokers look for in Applicants

Obtaining a mortgage can be a major decision for most individuals and families. Not only is it an expensive invest but it is also a long term investment for most consumers. Many first time home buyers may even find themselves wondering whether they can qualify for and be approved for a mortgage loan. If you are a first time home buyer and are not sure how a mortgage broker or lender will view your credit history and score in terms of offering you a mortgage loan it’s a good idea to find out exactly what brokers and lenders look for in an applicant.

Credit history and score, of course, are quite important. Your credit score and your history can help determine the interest rate you are offered for your mortgage and whether you will even be approved for a mortgage loan at all. This is not all that a mortgage broker or lender takes into consideration when reviewing a mortgage application; however.

He or she will also take other factors into consideration as well. These other factors can include your debt to income ratio and the mortgage payment to income ratio. While this may sound quite confusing it is really quite simply. The mortgage broker or lender wants to make sure that you do not already have so much outstanding debt that you will not be able to make the mortgage payments in a timely manner. In order to make this determination he or she will take into account all of the other expenses you are already paying such as personal loans, student loans, auto loans, business loans, etc. Credit card payments will also be considered when you make an application for a mortgage loan. For the most part, they prefer to see a total debt to income ratio of 28% or less; although this can vary somewhat from one broker or lender to the next. In simple terms this means that your total amount of expenses, including the new mortgage payment should be approved for it should total 28% or less of your monthly income.

As previously mentioned your credit history and score will also play a role in whether you are approved for a mortgage loan and if so what rate you will be offered. Keep in mind that while it is not necessary to have an excellent credit history and score the higher your score, the better rate you will be offered. Contrary to popular opinion, you can even be approved for a mortgage loan if you have a bankruptcy on your record, but the rate you are offered will be significantly higher than if you had an unblemished credit score. The most important factor is making sure that you have a clean and clear record over the past couple of years demonstrating that you have the ability to make payments on time.

If you are concerned about your credit score and how it may impact your ability to obtain a mortgage loan there are a couple of steps you can take in order to improve your credit rating before you make an application with a mortgage broker. First, make sure you review your credit history at least six months before you make the mortgage application. This gives you enough time to review the report, make sure there are no errors on it and if there are, get them cleared up. Also, if you do see there are problems you can begin taking steps to be sure all of your subsequent payments are made on time, which can raise your score somewhat.

Taking the time to understand what mortgage brokers and lenders look for in a mortgage applicant can help you to take the steps necessary to be sure you get the best mortgage loan possible.