Helpful Hints on what Lenders Look For!

Bankrate.com gives you great hints as to what to look for when purchasing a home and dealing with a Loan Officer or Lender..... The lending institution considers your creditworthiness when deciding whether to extend a loan and how much of an interest rate you will pay. Your creditworthiness boils down to three things: your credit history, your income and the loan-to-value ratio. CREDIT HISTORY: Credit Bureaus have a giant database with all of your information in it. It basically tells them how much debt you have and whether or not you pay your bills on time. They compile this information into a file called a credit report, and then boil all this down to a number between about 300 and 850. That number is your credit score. Sometimes it's called a FICO score, after Fair Isaac Corp., the company that pioneered credit scoring. You can check your Credit, and I suggest you do every year and be aware of your debt. Also YOU MUST PAY YOUR BILLS ON TIME. I can't stress that enough. I've seen a countless amount of applications where the borrower has a less than normal credit score and they try to Refinance there home (which is common now with all of the teaser rates they got 3-5 years ago), or on a purchase. If you take care of your credit and be aware of your score and how to improve it, your chances of getting the home of your dreams are within your reach! YOUR CREDIT REPORT CONTAINS: identifying information, such as your name, address and Social Security number; credit history, such as when you opened your accounts, how much you owe, the amount of your credit limits, whether you closed accounts or the creditors closed them, and whether you paid on time public records, such as whether you have any bankruptcies, foreclosures, liens, repossessions, or legal judgments against you (including failure to pay child support or taxes) lists of recent credit inquiries, these would be all of your debts. INCOME: Lenders want to see how much money you make and how long you've been employed at a job. They generally look for a 2 year period of steady income and steady employment. If you haven't been at your job for two years, they might possibly make an acception to you being in the same field of work for around 2 years. They will also look for your total debt to income ratio, which is the total amount of liabilities you have (mortgage payment, credit card bills, car payments etc.) divided by your total gross monthly income. Most lenders look for a ratio of 36 percent, but I've seen them go a little higher so don't be frightened if your ratio is 38 to 42 percent. Be prepared to show your lender proofs of income, such as W-2s, tax returns and other earnings statements, or get ready to be turned down or pay a higher interest rate. LTV or LOAN TO VALUE RATIO: This is the ratio between what you owe on your house and what it is worth. To keep it simple, if your house is worth 100,000 dollars, and you owe 90,000 dollars then you have an 90% LTV. You might hear that term floating around when your purchasing a home or refinancing. The lower the LTV the better rate you will get becuase the lender considers that a lower risk loan, so I would suggest saving some money and putting it down on your house. Another helpful hint on LTV's: Everything is insured in todays economy, even your loan! When you purchase a home and your LTV is above 80% the lender requires the home buyer to purchase Private Mortgage Insurance (PMI). Which is an insurance policy given to the lender in case of default on payments by the home buyer. The cost may be more than you may want it to be, and the payment is based on all of the above such as credit, incom and LTV. Hope this helps! Good luck to you all!