Know what you can afford
WHAT LENDERS LOOKS AT Lenders look at a variety of factors when determining if you qualify for a loan.
Before you start looking , your mortgage b ro ker and get pre-qualified, which will let you know how much home you can a ord. This can help you narrow your home search to houses within your budget, give you an idea of how much you’ll need for a down payment, and help you identify budgeting goals to work toward. To determine the loan amount you can qualify for, your lender will look at your income, debts, savings, and assets. As a general rule of thumb, your monthly housing expense should not exceed 28% of your gross monthly income. While getting pre-qualified can be a big advan-tage during your home search, it’s not a guarantee for a loan. Getting approved for a mortgage happens later in the process. Jump to page 4.2 to learn more about the mortgage application and approval process.
The 4 Cs of Credit
represents your credit history or financial integrity. Your credit score, how much credit you’ve used in the past, and whether you make your payments on time are examples of your financial integrity.
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represents your ability to repay a loan.
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The amount of your income and assets are compared against your monthly debts to make
is the asset securing the loan — in other words, the value of the home itself. If you default on your payments, the home can be repossessed by the lender. is how much money you’re able to invest in the collateral, represented by your down payment. The amount of capital you contribute shows that you have “skin in the game” and reduces the risk to the lender.
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