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List of Factors for Mortgage Qualification
There are a lot of things a lender has to look at before he gets you qualified for a mortgage loan. Let’s go through them in detail to know the top 5 factors for mortgage qualification in Texas.
I - Credit
The first and the most critical factor that every lender checks are – your credit score. Some people may have outstanding credit, while some may have challenges due to a late payment or some other issues.
The lenders will first check if you can make all your payments on time. Your credit score reflects your credibility.
Usually, to qualify to get a conventional mortgage or a refinance, your credit score needs to be at least 580 or more.
There are different programs for people with a credit score lower than 580 as well. However, your credit plays a significant role in mortgage qualification.
There are many online mortgage qualification calculators in Texas that you can use to anticipate your monthly payments.
II - Income
Lenders want to know if you have job stability, how long you have been on your job, and if you can afford the new payments with your current income.
Your income status is also one of the crucial factors for your mortgage qualification.
Usually, lenders would want to look at your job history as far as two years, at least to ensure you have excellent stability. The stronger the history stronger is your chance to qualify for a mortgage or a refinance.
III - Loan to Value Ratio
For your mortgage qualification, the lender will also consider the Loan to value ratio. The loan to value ratio is calculated on (Total loan amount) ÷ (Expected property value) × 100.
For example, if your loan amount is $80,000 and your property value is $100,000 then the loan to value ratio would be $80,000 ÷ $100,000 × 100 = 80%.
If you are buying a new home, your down payment is a crucial part of calculating the Loan to value ratio.
To qualify for a conventional loan, your Loan to value has to be 80% or lower. However, some programs could get you qualified up to a 90% – 95% loan to value ratio.
IV - Debt to Income Ratio
Lenders would not only like to see your credit, but they would also look for the list of debts on your credit report when it comes to your mortgage qualification.
You may have other debts apart from your mortgage payments like credit cards, car loans, child support, student loan, or any other personal loan.
Lenders need to see that you are paying your debts on time, and also you have the potential to cope up with the new mortgage payments.
Lenders look at this term as ‘debt to income ratio.’ Usually, the debt to income ratio should be less than 50% to qualify.
V - Appraisal
An appraisal is the last piece of the puzzle for your mortgage qualification. The lender needs to know how much is the value of the collateral before finalizing the loan amount.
Because it happens many times that the actual property value may vary from the sales price.
For that, the lender would ask for a home inspection, usually through a third-party appraisal company, to evaluate the actual value for the house in question.
The final value would depend on a lot of factors like physical characteristics, neighborhood comparables, last appraised value, etc.
After the appraisal is done, the ultimate value is derived, which would determine the final loan amount.
Conclusion
here are the top 5 factors considered by the lenders for the mortgage qualification in Texas. Apart from that, you can also use an online mortgage qualification calculator to know how much is your mortgage qualification amount.
If you have all the information with you like your credit score, your monthly gross income, and the approximate value of the home that you are looking to buy, you can use an online mortgage qualification calculator to anticipate your loan qualification amount and the monthly payments on the same.
