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How to Qualify for a Mortgage

Mortgage Basics

A Primer on Qualifying for a Mortgage

Many prospective borrowers looking to finance a home may not be aware of what affects their qualification for a mortgage and it’s important to be upfront with them. How does an underwriter make up their mind about whether or not a loan is a good risk? Here’s a better look at what goes into qualifying for a mortgage.

Gaps in employment longer than six months may be a red flag to a lender, unless a reasonable explanation can be provided.  Likewise, it may be trickier to explain job gaps when transitioning from one field to another. Another roadblock is not being straightforward about income, as lenders average hourly wage into a monthly figure, which may result in less money to qualify than what was initially expected – especially if an hourly employee has changed jobs within 24 months. Income from a second job and overtime will also require a 24-month history.

Many borrowers that visit MortgageBite are also unaware of what their credit score is and most consumers receive one credit score thinking that score is what the lender bases their loan application on. In reality, lenders pull three credit scores and the middle score is used to measure risk. When credit is pulled can also affect the score, depending on fluctuations in credit card balances. 

Not having enough cash to close at escrow is another issue that can cause a mortgage to stop dead in its tracks. Many borrowers may not be able to afford the full down payment plus closing costs. Gift funds are always a possibility, but each lender has specific requirements, such as only accepting funds from blood relatives and ensuring that the funds are sent directly to escrow and not to their checking account. It’s also important to keep in mind the importance of documenting deposits.

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