Being considered for a loan means that four primary aspects of your financial life will be viewed and scrutinized by a mortgage lender: your income, your debt, your credit and your money for move in. The following is a guide on the questions that a lender will ask, and the reasons behind them.
Income & Employment
What is your gross income?
This question is used to gauge your pre-tax and pre-deduction earnings. This is the baseline lenders use to determine the mortgage amount that you will qualify for.
Do you make any overtime pay or bonuses?
This question is used to determine if you have any other income that can be utilized toward increasing the approval amount.
How long have you been employed?
This question is used to gauge stability of your income. Individuals who jump careers every few years are considered to be a higher risk when it comes to loans than someone who has stayed at the same place of employment doing the same type of work for 24 months or longer.
What is the minimum amount you pay toward all unsecured loans each month?
This question is used to determine the amount of disposable income a borrower has once all of their monthly financial obligations have been met. Unsecured debt applies to credit cards, personal loans, student loans, car payments or any other monthly payment currently being made to satisfy a debt.
Do you have any debts in default or collection?
While this will be discovered when pulling a credit report, this question is used as an opportunity to head any negative items that you are aware of on your credit report off at the pass. Not all negative items are a death sentence when it comes to a mortgage approval. This question is designed to help a loan officer assess your overall financial health, and give you an opportunity to state your case in the event of any inconsistencies.
Once a lender has pulled a borrower’s credit they may have questions on items that exist on a credit report. The most common are questions asking a borrower to verify any negative items that exist on a credit report in order to validate the information as reported.
Money for Move In
Lenders want to validate available assets that can be applied toward down payments and closing costs when making a home purchase. The more available funds a borrower has to close on a home will be the less of a risk they are considered, meaning that they are more likely to obtain a loan. The following are some of the more common questions that a lender will ask in regard to money for move in.
Do you have a savings account?
How much is in your savings account?
Do you have an IRA or 401K that you could access for additional funds?
Do you have a family member that would be willing to provide you funds as a gift for down payment or closing costs?
Lenders questions will vary from one borrower to another based on the buyer’s unique financial situation. However, this information can be utilized as a baseline guide for being prepared when applying for a mortgage. Prior to applying for a mortgage, borrowers should have a copy of their credit report so that no surprises occur during the loan application process. You can download a free credit report from all three bureaus at www.annualcreditreport.com.