Purchasing a home or real estate is one of the most significant investments individuals make. A home loan or a mortgage is instrumental in making this dream come true of becoming a homeowner. Michigan has over 4,629,611 private housing units, with the median value of owner-occupied homes at $162,600. Financial institutions like a mortgage company in Grand Rapids, MI and banks provide attractive home loan deals to individuals who meet the standard requirements for their institution and who submit the necessary documents along with the application.
Factors That Lenders Consider For Mortgage Eligibility
When individuals approach a home loan officer, the first thing they look into is the applicant’s eligibility. Individual institutions might have specific criteria against which they might decide to approve one’s loan. However, generally, there are a few standard eligibility criteria that all institutions consider, including,
Credit History and Current Credit Score
Presenting a spotless credit history with on-time repayments can be extremely beneficial to approving a home loan application. A high credit score proves to the loan officers that the applicant is a trustworthy and reliable borrower. It enhances their chance of acquiring attractive deals on mortgages. Higher the credit score, better the financing opportunity. Experts recommend prospective homebuyers have a credit score above 750 to ensure eligibility without higher interest for home loans. Individuals can check their home loan eligibility and repayment ability through Home Loan Calculators. Those with poor reports or payment delinquencies must improve their scores before approaching home loans.
Age of the Applicant
The applicant’s age is equally a significant factor in their home loan application eligibility. Younger applicants with a longer tenure of work ahead of them have better chances of getting attractive deals on home loans. However, applicants nearing retirement or old age might have limited options or might not get the most favourable mortgage options. Higher age or ailment might result in shorter loan tenors or higher rates.
Financial Standing and Income
The loan applicant’s income and financial standing indicate their ability to repay the loan. Their financial statements indicate their income inflow, expenses and other commitments that factor into their ability to consistently and reliably repay the mortgage. The loan sanctioning institutions assess these statements of all applicants to weed out candidates who might have a high risk of lapsing or defaulting the EMI repayment. They generally prefer income earned from salaries or wages to the variable tips or commissions unless they have a history of consistency. Their income must be sufficient to support the loan amount minus other commitments. It includes their favourable debt-to-income ratio.
Savings and Debt to Income Ratio
Loan applicants must place a down payment for the mortgage, which is a large sum. While the Federal Housing Administration (FHA) of Michigan allows home loan borrowers to install a minimum of 3.5% of the purchase price, some institutions may require them to pay 10-20% of their loan amount. Therefore, lenders consider the savings one has to fulfil the large deposit.
Documents on proof of income, proof of asset (401k, 403B, IRA, CD), driving license, social security number and any additional paperwork necessary help loan officers from a mortgage company in Grand Rapids, MI to determine which mortgage plan would be the best option for the applicant. Additionally, it helps them determine the eligibility for specific home loans and the application process. Possessing all the mandated documents can prevent applicants from experiencing rejection and make the entire process hassle-free. Listed below are the essential documents that mortgage financial institutions require from potential homeowners.
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