What Lenders Are Looking For    

Many people ask what criteria we use when underwriting a loan.  There are many parameters we take into consideration, but for the sake of simplicity we will concentrate on the four primary indicators.
Credit First and foremost we want to know how you have handled your previous obligations.  We will carefully analyze your credit report looking not necessarily for individual instances, but more for patterns in your payment history.  We will also take into account your credit score.
Cash We need to make sure you have sufficient liquid assets to close the transaction.  Is there going to be a gift involved?   Are you selling your current home?  Are you liquidating some stock?
Collateral This is where the property figures into the equation.  We will review the appraisal to make certain this property supports the loan amount and is acceptable for the loan program for which you have applied.
Capability This is where we determine if you qualify for the payment.  We will take into account more than just your current income.   We will want to know about  your work history, and likelihood of continued employment.
Generally you need to pass on all four counts, however if you are very strong in one area it may offset weakness in another.  For example if you have a 20 percent to put down but your credit report has a few nicks in it, you may still be ok.  The large down payment compensates for the credit problems.  The following is a partial list of compensating factors :
  • Substantial net worth in the form of liquid assets
  • Cash reserves after closing in excess of three months of house payment
  • Excellent credit history
  • Excellent payment history or a prior mortgage obligation
  • Property that qualifies as an energy efficient dwelling
  • Little or no increase in monthly housing expense
  • Large down payment toward the purchase of the property
  • Borrowers potential for increased earnings and advancement

Other Books In the Library

Main Library Page <> Down Payment Stratagies <> Chart of Interest Rates <> Questions To Ask A Lender <> What Are Lenders Looking For? <> Why Buy A Home <> VA Loans <> FHA Loans <> Settlement Cost Handbook <> 3 Things To Avoid <> How To Get Out Of Debt <> Understanding How To Use Credit <> Credit Repair <> Appraisals <> Title Insurance <> Credit Scores <> Automated Underwriting <>