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If you're trying to buy a house, there is nothing worse than finding your dream home to be turned down for a mortgage.
However, that won't happen if you do your mortgage shopping correctly.
The right mortgage professional, whether a bank loan officer or a mortgage broker, will evaluate your credit profile before you ever reach the application process, help you solve problems, and steer you to appropriate loan products. You could qualify for one mortgage program but fail to meet the requirements for another.
That's important because if you apply for a mortgage and are declined, it may hurt your credit score. Plus, the form you receive from the lender declining your application won't tell you why your application was rejected.
Since the mortgage crisis, lenders have become much more careful about verifying income sources. That makes it especially important for freelancers and contract workers to deal with a loan professional who knows how to make their applications attractive to lenders by providing the correct documentation.
If you've decided to buy a home, you should find a good loan officer and get pre-qualified for a mortgage before looking at houses. If there are any problems such as errors on your credit reports, collections issues, or any income that won't be counted, you want to be aware of that before you find your dream house.
Things to avoid getting turned down for a mortgage:
Get your credit reports early: You want to look at your reports from all three major credit bureaus (Equifax, TransUnion, and Experian) to ensure there are no errors. If you've got collection accounts or a few late payments, ask the creditor to remove those, Fleming suggests. If your credit score is low, meet with a mortgage broker or credit counselor and ask for suggestions to improve it.
Know what income a lender will count: Lenders like to see a two-year track record in your job, though a new position in the same field probably won't be counted against you. A lender may happy to work with you even if you're in your first job in an area you studied in college. But if you've just switched from dentistry to business management, a lender may not be willing to count your income until you show two years of earnings.
If you're a freelancer, plan way ahead: If you're self-employed or own a business, a lender will want to see two or three years of tax returns to start. If you take a lot of deductions to cut your taxable income, know that a lender will consider only your net income, not your gross income. If you work on a contract, you may need to verify with the employer that the agreement will continue. "Freelancers are tough," Fleming says. If you're independent, "you'd better have income on your tax returns, or you're not going to get anywhere."
Payoff any debt before applying: When deciding whether to grant a loan, a lender will consider all your debt, including student loan debt, credit card debt, and car loans. You won't get a loan if the debt-to-income ratio is too high. For most mortgages, the debt-to-income ratio for all debt can't be higher than 43 percent.
Be able to source any funds you play to use: The lender will want to know where you got your down payment. If it's a gift or a loan from a family, you will need to specify which and document that the family member has the money and can afford to give it to you. If your parents provide money, for example, they will need to show bank statements and provide a gift letter.
Manyata Earthsong is a residential project of Manyata Developers Pvt Ltd at Devanahalli, Bangalore. Manyata Earthsong planned to recreate the garden city where residents love to live in. The project offers villa options with a perfect combination of architecture and features to give you a comfortable living.