How To Prequalify For A Loan

How you prequalify for a loan is determined by two factors. Read this article, learn how to deal with it, and get approved.

Two Key Factors in Qualifying for a Home Loan:

When a lender makes a decision about a mortgage application, they consider two basic factors:

• your ability to pay the loan
• your willingness to pay the loan.

It's that simple. But the ability to repay the mortgage is determined by the long process of verifying your current employment and analyzing your total income.

If you want to prequalify for a loan, lenders prefer for you to have been employed at the same place for at least two years, or at least be in the same line of work for a few years. Your proposed monthly payment will be compared to your monthly income and debt. Basically, the debt to income ratio should not exceed 50%.

Willingness to repay is influenced by how you have paid previous loans and by examining how the property will be used. It is reflected by your credit report and previous commitments to pay rent and/or utility bills.

There is also a greater tendency to stick with your payments if you live in a house as opposed to a rental property or vacation home.

It is important to remember that there are no set rules and each applicant is handled on a case-by-case basis. Many applicants come up a little short in one area, but make up for it with other strong points. These compensating factors may include a large down payment, solid employment, extensive educational background or overall financial health.

For applicants who need to make a lower down payment, mortgage insurance is protection for the lender in case you stop making payments. This allows low and moderate income families to become homeowners with low down payment programs.

Getting qualified before you apply for a loan can help you understand how much you can borrow and see what lenders look at to consider you for a loan.

When you prequalify for a loan, it is not as beneficial as a pre-approval where you have to go through a more rigorous process, which includes verification of your credit, income, assets and liabilities.

It is highly recommended that you get pre-approved before you start looking for a house. This will help you:

• Find out the best house you can buy, so you don't waste time looking for properties you cannot afford.
• Puts you in a stronger position when you are negotiating with the seller, because the seller knows that your loan is already approved.
• Helps you close quickly, since your loan is already approved.
• In order to be pre-approved, you must submit a full application.

Quick NLC Loan Application Form

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