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Factors at playÂ
The financial markets, unemployment rate and the Federal Reserve are continuing to support low rates, thereby shifting consumer focus onto interest rate as the catalyst for taking out a home mortgage. While rates are attractive, the ability to qualify becomes an entirely different paradigm. Even the most savvy consumers aren’t exempt from underwriting scrutiny.
Most consumers would be more financially suited to focus on ability to procure financing — a.k.a. passing credit standards — rather than what their interest rate and payment is going to be.
The ideal credit profile that most lenders look for includes the following:
*Don’t meet one or more of these requirements? Don’t worry. However, more proof will be required to determine your ability to qualify.
If your credit profile matches the ideal credit profile above, then by all means start comparing mortgage offers by rate and cost. The good news — the loan qualifications are universal across the board, making a level playing field.
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Signs you’re having trouble qualifying for a loan
The most evident situational credit challenge is when the mortgage lender continually asks for updated financial documentation or when financial documentation you supplied causes more questions. Best example — the lender asks you for updated bank statements supporting appropriate cash figures to close the transaction, you provide the updated bank statement thinking you’re doing exactly what the lender asked you to do, only to now have to explain the random deposits going into your bank account because the unsourced monies exceed more than 25% of your income.
Another common sign you’re having challenges with qualifying is the fact that the lender is taking longer to close the transaction and/or there is an interest rate lock extension which, depending on the lender, you may or may not be charged for.
Ultimately, due to the strict underwriting constraints set forth by the financial markets, the ability to secure financing is paramount, and will certainly remain in place for the foreseeable future. The consumer looking for a loan today doing his or her due diligence in comparing mortgage quotes should get qualified with a lender first, then focus on the rate, payment and costs.
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December 13, 2023
Mortgages
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