Whether one seeks to make use of a mortgage, as a component of financing a new home, or, if it makes sense, decides to refinance their home, for a variety of reasons, including personal finance, getting a better rate, and so on. It is important to begin the process, and to understand, some of the factors, which often become major considerations for the rehabilitation process. Since our home, for most of us, represents our single largest financial asset, it doesn’t make sense, then, to take the time, and the effort, to understand, and leverage, the best way to achieve this goal. With that in mind, this article will attempt, briefly, to consider, examine, review and discuss 5 factors, which may influence whether a person qualifies for these loans.
1. Total debt: Lending institutions take into account many factors, one of the most important of which is the ratio of total debt to earnings. If this percentage is too high, many will refuse to consider the candidate! These debts include credit card debt, unsecured loans, other debts and obligations, etc. When one decides to move on, check this out first, and try to pay off the total debt!
2. Debt/Earnings Ratio: There are only two ways to reduce this rate/percentage. One is to increase one’s earnings/income, and the other is to reduce debt. For most of us, the second approach is the easier one to tackle in a controlled and timely manner!
3. Housing Debt/Earnings Ratio: There are two ratios, lending institutions, almost always, scrutinize and scrutinize. These percentages are not recommendations, they are generally hard/hard limits! In addition to it being a necessity to get a mortgage, one must seriously realize, if this is too high, how can anyone get comfortable with the monthly fees of home ownership!
4. Credit rating; Debt repayment: How you handled past and/or existing debts is an important consideration! If you have shown, you are responsible, in this respect it is a positive action, rather than an excellent performance, in the past! There are few credit agencies, which are used by lenders, and credit rating, which one earns and maintains, is an important factor!
5. Past, present and future (projected) earnings and employment/job security: Lenders check your past and present earnings, whether you are gainfully employed, or self-employed, and the odds of maintaining enough earnings are favourable! The more confident you are, the higher your chance of qualifying for a mortgage.
Mortgage insurance, and the most suitable (with the best terms), depends on many factors, as mentioned above. The best prepare and handle this process in advance, and it’s easier and less stressful!