Home > Blogs > Adam Brett > Adam Brett - Your North Orange County Realtor | Fullerton | Brea | Placentia | Yorba Linda

MORTGAGE BLOG UPDATE: 3 Factors That Can Negatively Affect Your Mortgage Application

Real Estate Agent with The Adam and Eric Group 01499486

March 29, 2011 08:37 AM

3 Factors That Can Negatively Affect Your Mortgage Application

There are many factors that can affect your mortgage application and possibly get you denied. Lenders want to see an applicant who is credit worthy and can show ability to repay. It is important to understand what factors will hurt you and to plan ahead to be sure you present the best financial picture to the lender at the time of the application.

1. Credit Credit is a huge factor is approving a mortgage. If you don't have a good credit score, you won't qualify for a conventional mortgage, leaving you with only sub-prime options. These are very costly with higher interest rates. It is crucial to know your score before you apply. This gives you time to fix any problems on your report. If your score is low, a few months can make all of the difference. Be sure to pay down credit card balances before applying for your mortgage. This accounts for about thirty percent of you credit score. You want to have low debt-to-limit ratios. Also, pay everything on time. Be sure not to open any new credit, as by buying a car. This will negatively affect your loan application. A score above 720 is optimal for a conventional mortgage and 640 or better for ALL FHA loans up to 97% LTV.

2. Employment A strong employment history shows stability and proves you have the means to repay the loan. Most lenders want to see that you have been with the same employer for two years or longer. It is also important to have been in the same field of work for two years. Once you have applied for the loan, you may not change jobs before closing. If you lose your job or take a new job, your loan will likely be denied. At closing, you will be asked for proof of employment, like a recent pay stub or possibly a call to your employer.

3. Down Payment By saving a hefty down payment for your new home, you are a lesser risk to the lender. It gives instant equity to the home. It also proves financial responsibility by showing you can save. You no longer need 20 percent in order to qualify for a mortgage. However, if you don't put down twenty percent, you will likely pay for private mortgage insurance. Many lenders require only 3 or 5 percent down payments. If you have good credit, you can get by with a small down payment. If your credit is poor, you will have to put more money down. Some borrowers who have poor credit choose to use a hard money lender. Hard money mortgages require as much as 35 percent down. These are not commonly used, but the possible high interest rate on them shows the importance of good credit if you don't have the necessary funds for a down payment. I specialize in ALL FHA loans…..purchase money or refinances. Fixed rates are around 4.5% 4.625% APR.

Regards,
Matthew R. Chase
"I'm the Realtor's Best Friend!"

This information is provided to you by Matthew Chase of SWBC Mortgage, a long-time trusted partner of Adam Brett, The Home Sold Team. He is a direct Lender who can ensure you get the best rate and loan available. For more information about interest rates, visit: www.homesoldteam.com or contact Matthew Chase.