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Preparing for a Home Loan
Preparing for a home loan is imperative if you want to get the best rate, terms and lowest fees. Your credit score will be the biggest factor; however, there are many other factors that will affect your eligibility for the best product available to you.
If you are considering buying or refinancing soon; we highly suggest that you start preparing a minimum of 3-4 months before you start shopping your loan because taking care of inaccuracies or negative items takes time. Follow these steps to ensure you get the best product for your money..
- Get your 3-bureau credit report and identify any negative items affecting your score. Click Here
- Attempt to settle or simply pay off any debts that are past due. We offer a custom letter preparation service that can help you accomplish this easily and effectively at a minimal cost compared to any debt management or settlement service
- Attempt to delete any and all negative items that are affecting your credit score. This includes late payments, charge-offs, repossessions, bankruptcies, judgments, liens, collection items, excessive inquiries, conflicting or inaccurate personal information etc.. You can do this on your own using our Free Credit Repair Kit, or you may want to call 1 800 315 0740 for our Credit Repair Service.
- Maximize your credit scores by paying down any balances you may have with current creditors such as credit cards, personal loans or finance companies. If any balances you owe on revolving accounts are close to the limit or maxed out it is affecting your score very negatively. You should always keep revolving accounts under 30% of the spending limit.
Qualifying for a Mortgage
Lenders look at many things when assessing your qualifications for a mortgage
For many home buyers, the prospect of meeting a mortgage lender is at least a little bit scary. Many people seem to think lenders are looking for reasons to turn them down. They want your business and are looking for ways to help you get a mortgage. If you work with a lender before you decide on a home, you will know whether you’ll qualify for a mortgage large enough to finance your home.
Credit Assistance Network helps you with this process. Preparation is really the answer to getting the best loan and most desirable terms. When you apply for a home loan with us, we first assess your situation very carefully by providing a free credit analysis.
What do most lenders consider when they qualify you for a loan?
1) Your household income and expenses
Lenders look at your income in several different ways, starting with the total amount. But how you earn it is also important. For example, income from bonuses, commissions and overtime can vary greatly from year to year. If these sources make up a large percentage of your income, your lender will want to know how reliable they are.
Your lender will also consider the relationship between your income and expenses. Generally, experience suggests that your fixed housing expenses (mortgage payment, insurance and property taxes, but not repairs or maintenance) should not be more than around 28% of your gross monthly income, although this is not a hard and fast rule. Your lender may also consider other long-term debts, such as car loans or college loans.
It may seem that your lender needs to know everything about you for the application, but actually all your mortgage lender needs to know about you is your employment and finances, and information about the home you’re buying. However, you will need to provide quite a few details about these topics, and your application process will go much more smoothly if you’re prepared. Be sure to ask your mortgage lender what information you’ll need to complete your application. In general, it is a good idea to have the following available when you apply for a loan.
2) Employment and Income Information
Your employment, salary and bonuses, and any other source of income for the past two years (bring your most recent pay stub, previous year’s W-2 forms and tax returns if possible)
The most recent account statement showing the amount of any dividend and interest income you received during the last two years.
Official documentation to support the amount of any other regular income you may receive (alimony, child support, etc.)
3) Personal Assets Information
Current balances and recent statements for any bank accounts, including both checking and savings.
Most recent account statement showing current market value of any investments you may have such as stocks, bonds or certificates of deposit.
Documentation showing interest in retirement funds, if any.
Face amount and cash value of life insurance policies, if any.
Value of any significant pieces of personal property, including automobiles.
4) Credit and Debt Information
The balances and account numbers of your current loans and debts, including car loans, credit card balances and any other loans you may have. The idea is to arrive at a monthly payment you can afford without creating financial hardships.
5) Down Payment
In the past, lenders expected home buyers to make a down payment of up to 20% of the asking price of their home. However, as the average price of homes has gone up, lenders have found ways to lower the required down payment so you do have options if you can’t afford such a large down payment. Credit Assistance Network has relationships with lenders that offer 100% financing.
When deciding whether to give you a loan, lenders must determine that you will be able and willing to repay the mortgage debt. To ensure that you will be able to pay off the debt, lenders may look at many factors, including:
- Your employment history
- Your income and outstanding debt
- Your savings patterns and amount of savings
- The type and amount of loan you are requesting
- The amount of down payment you plan to make or the equity that you have
To ensure that you will be willing to pay off the debt, lenders typically look at your credit history and scores. Your credit score predicts how likely you are to repay the mortgage debt. What is a credit score? A credit score is a number that indicates statistically how likely a borrower is to repay future debts.
If you have had credit problems, be prepared to discuss them honestly. Every lender knows there can be unavoidable reasons for credit lapses, such as unemployment, illness or other financial strains. If you have had a problem but have worked with your creditors to correct it, and your payments have been on time for a year or more, you’ll probably have nothing to worry about. If you still have negative items on your credit report you can fix them with a bit of persistence or help.
Repair your credit yourself with our free credit repair kit
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Most people don’t need to worry about the effects of their credit history. However, you can be better prepared by reviewing and monitoring your credit reports before you apply. That way, if there are any errors, you can take steps to correct them before you complete your application and get rejected.