Getting a home loan is not difficult, but the outcome of the application process depends on a number of factors among which job stability, business ownership, level of income, amount available for down payment, funds deposited at a bank, and credit history, among others.
First, crediting institutions favor applicants with an employment history of at least 2 years. In the best case, the applicant has worked for the same employer for two consecutive years. Frequent job changes and employment gaps lower the chances of being granted a bad credit home loan. The borrower's credit history is also important and the better the credit rating, the more favorable the conditions will be. Lenders take into consideration the FICO score as to evaluate the ability of the borrower to repay the loan. While the formula for computing the score is a complex one, a number of factors are taken into account such as bankruptcies, judgments, pay history, collections, as well as residence and job stability.
It will not be difficult to obtain the loan if your monthly payments toward mortgages, auto loans, student loans, and credit cards are no more than 41 percent of your total gross income. The debt to income ratio is also important and generally, the less you have borrowed, the better the ratio.
The purpose of the mortgage loan will also determine how easy it is to obtain it. For example, if the borrower applies for a construction loan, the lender will usually require a down payment. Another requirement is a good credit rating. Down payment is not always required, and some lenders feature zero percent down mortgages. While getting a home loan will not be difficult, the repayment terms will not be as favorable. Even a down payment of 5 - 10 percent helps reduce the interest rate on a home loan. The type of property is also important when assessing an application for a home loan. For instance, applicants who seek to buy a condo or manufactured home will pay higher interest charges. Those who want to buy a condo or a 4-plex in a high rise may be required to provide collateral. Properties consisting of 4 or more units also require the provision of collateral.
Lenders are unwilling to lend money to borrowers who are overloaded with multiple debts, especially now, after the recent peak of foreclosures. Borrowers who own a house are favored by the creditors as they are more committed to repaying their loans. In addition, no-down loans are most often an option for borrowers with an excellent or very good credit history.
Borrowers who own a business may have to provide a history of the business, showing how long the company has been in operation.
