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Sam

It is necessary to get pre-qualified to get a mortgage loan. Lenders consider your employment history, credit history and present income and monthly expenses to find out whether your loan can be processed.

Employment History:
Lenders generally consider employment status of the past 2 years of applying for the loan. There can be changes in jobs but there should be stability in income. For those who are self-employed, lenders usually consider their personal income as well as the profits in their business. They generally prefer those self-employed persons who have 25% or greater interest in their business.
Credit Score:
The credit score is a number assigned in your credit report that indicates your creditworthiness. The credit reports are generally ordered by lenders from credit bureaus who collect information about the financial status of an individual. Based on a statistical analysis of your credit history, your credit score is determined. Whether you have paid back your credits in time and the amount of outstanding credit affect your credit score. Lenders generally consider the FICO score to determine the credit score. The FICO score lies between 400 and 900. A higher credit score implies a better chance of getting the mortgage.
Monthly Income and Expenses:
The housing ratio and debt ratio involving your monthly income and expenses towards debts determine whether you can qualify for the loan. The housing ratio being the ratio of your monthly mortgage payments and monthly gross income should be about 28% to get pre-qualified. The debt ratio which is obtained by dividing the sum of the monthly mortgage payments and other debt payments with the monthly income is expected to be around 36% so that you can easily pre-qualify for a mortgage loan.

Thus with a good employment status, a fair credit score and the expected level of income and expenses, a borrower can easily qualify for a mortgage loan.

Guest

I was in the Army and was wounded and medically discharged. It took 2 years to get the rating for my wounds, which means I am finally getting paid. During those 2 years of no income my credit took a nosedive to about 500. But now I have a steady income of at least 2,600 month tax free. Would I be able to get a mortgage out there.

Niicss · Posted: Fri Oct 16, 2009 2:11 am Post subject:

Your steady income would be considered as a positive point by the lenders while giving you a loan. However, your credit score will also play an important role when you apply for a loan. In order to get a conventional loan you would require a credit score of 740 whereas to get a FHA loan, you should have a credit score of 620. If you do not satisfy this criteria, lenders won't give you a loan.

gmakerley · Posted: Sat Oct 17, 2009 8:50 am Post subject:

vinny, your score is going to have to come up a bit - likely to at least 550 before you'll get a halfway decent deal on a mortgage. there are lenders (i don't have specifics) who will work with you when your score hits that level, to obtain a loan. you'll have to clean your record of collections and judgments, etc., and you'll have to have a good record with at least a couple or more creditors. you'll need a reasonable amount of savings as well. it's not out of the question to think you can qualify. it's a matter of meeting the right lender at the right time, and making sure you're treated with the respect that any borrower is due.

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What factors are considered for pre-qualification?