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How to get approved for a mortgage?

Tips for getting your home loan approved!

Key factors a lender looks into for mortgage preapproval:

Debt-to-Income (DTI) ratio

  •  Debt-to-income (DTI) ratio - The debt-to-income (DTI) ratio is the percentage of your gross monthly income that goes to paying your monthly debt payments and is used by lenders to determine your borrowing risk.
  • The debt-to-income (DTI) ratio measures the amount of income a person or organization generates in order to service a debt.
  • A DTI of 43% is typically the highest ratio a borrower can have and still get qualified for a mortgage, but lenders generally seek ratios of no more than 36%.

Loan-to-Value Ratio

  • Loan-to-value (LTV) is an often used ratio in mortgage lending to determine the amount necessary to put in a down payment and whether a lender will extend credit to a borrower.
  • Lower LTVs are better in the eyes of lenders, but require borrowers to come up with larger down payments.
  • Most lenders offer mortgage and home-equity applicants the lowest possible interest rate when the loan-to-value ratio is at or below 80%.

Fico Score

  • FICO scores are the most widely used credit scores in the U.S. for consumer lending decisions. 
  • FICO scores are based on the information collected on individual consumers by the three major credit bureaus, including their payment history, credit utilization, and the age of their accounts. 
  • FICO scores are based on these five factors: Payment history (35%),  Amounts owed (30%), Length of credit history (15%), New credit (10%), Credit mix (10%)

Income

Employment History

  • For W2 employees: usually lenders look favorably at W2 employees with 2 years on the job in the same industry.
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