Three Key Factors in Qualifying for a Home Loan
When a mortgage company makes a decision about a home loan application, the lender primarily considers three basic factors: (1) your ability to repay the loan; (2) your willingness to repay the loan; and (3) the collateral.
Ability to repay the mortgage is determined by verifying your current employment and analyzing your total income. Lenders prefer for you to have been employed at the same place for at least two years or to at least be in the same line of work for a few years. Your estimated monthly payment will be compared to your monthly income and debt.
Willingness to repay is influenced by how you have paid previous loans and by examining how the property will be used. Willingness can be gauged by your credit report and previous commitments to pay rent and/or utility bills.
Collateral is property that is pledged by a borrower to protect the interests of the lender.
It is important to remember that there are a set of rules each lender uses to assess these factors on each loan and determine if the lender will ultimately lend you money. These rules are called a Credit Policy. Each loan application is evaluated individually on a case-by-case basis. Many loan applications may come up short in one area, but make up for it with other strong points. These compensating factors may include: a large down payment, extensive educational background, or overall financial health. Securing mortgage insurance to protect a lender in the event you are unable to make your payments may also impact your qualifying for a home loan.
Contact your Academy Mortgage Loan Officer with any questions about qualifying for a home loan.
Buying Better Than Renting After Three Years in 64 Percent of Metros
May 30, 2013
According to a recent report by Zillow, in 64 percent of metropolitan areas across the nation it's a smarter financial move to buy a home when compared to renting, if the person plans on staying for three years. This information is particularly important for a first time home buyer weighing their options.
The report showed that certain housing markets fared better than others when it came to their breakeven point where buying was cheaper than renting. Zillow factored in all costs associated with buying and renting when compiling the information, including upfront payments, closing costs, anticipated monthly rent and mortgage payments, insurance, taxes, utilities and maintenance costs.
"Locally high home value appreciation in many areas, combined with historically low mortgage rates and low home prices relative to recent peaks, has made buying a home a more advantageous financial decision than renting for many would-be buyers," said Zillow Chief Economist Stan Humphries. "The decision to buy or rent should always take into account a number of factors, one of which is how long a buyer or renter plans to stay in a property. Even in areas with relatively low breakeven horizons, buyers should resist the temptation to buy and sell properties based only on short-term goals."
No bubble in sight
With today's housing market seeing low rates, prices rise and sales increase, Americans can't help but think is it all too good to be true? A recent report from Trulia indicated that it is not and no housing bubble forming.
The report noted that for a bubble to form, home prices have to rise beyond their fundamental value. Trulia says that the actual value of a home is based on supply, demand and expectations of where the housing market will be in the near future.
According to the report, home values are actually undervalued by 7 percent across the nation. When comparing this to pre-bubble levels, it is glaring that today's housing market is not in a bubble. Trulia indicated that homes were overvalued by 39 percent in 2006, just two years before the market collapsed.
"Home prices fell so much after the last bubble burst that they still remain below normal levels even as prices rise sharply today," said Jed Kolko, Trulia's chief economist. "Several forces are waiting in the wings that should slow down today's rapid price gains before they rise into bubble territory again. More inventory, higher mortgage rates, and fading investor activity would each take home-price gains down a notch."