What Home Buyers Should Know About Mortgage Approval
For many Chicagoans, the ability to purchase a home hinges on getting mortgage approval. So what exactly are lenders looking for when evaluating loan applications? And how can you be better prepared to ensure your mortgage app is approved?
Inman News had an interesting article yesterday that addressed this very subject. The article, “6 must-haves for mortgage approval,” discusses what obstacles today’s home buyers face when trying to get a loan and how to help your chances of securing a mortgage in this day and age.
First of all, current home buyers have to meet very strict requirements to pass lender approval. This includes a credit score in the 700s to get the best interest rates, sufficient funds for a 20-25% down payment, money for closing costs, and proof of adequate income to support monthly mortgage payments. Even buyers that do fit this bill could run into issues if they are self-employed, have gaps in their job history, have investments, or own multiple properties.
Buyers who own a home and are looking to move-up or purchase another primary residence have another set of challenges to overcome. For instance, current homeowners will probably be required to have 30% equity in their property (as verified by a lender appointed appraiser). If the homeowner plans to lease out their existing home, they will also need proof of a cashed check from the tenant for at least the first month’s rent to show they have income from the property.
Industry experts recommend home buyers enlist the assistance of a very reputable mortgage broker as soon as possible to avoid preventable delays and surprise application denials. That may entail going with a lender who doesn’t necessarily offer the lowest interest rate. In today’s market, a record of successful closes can be much more valuable than a cheaper rate—especially if it’s a matter of getting approval or being declined. As your advocate and guide, it is essential for buyers to be completely upfront with their loan agent about any potentially problematic financial situations. Mortgage professionals are privy to the underwriting process and can advise buyers on a course of action to best meet underwriters’ conditions for loan approval.
Because there can be a discrepancy between appraisal value and purchase price, it is also a smart idea for buyers to write an appraisal contingency into their purchase contract. For the most part, lenders will not grant a mortgage on a home that costs more than it is worth. This is another major road block for people trying to buy a home in today’s real estate market—and another reason it is important to have experienced agents on your side.
For more information on mortgage lending in Chicago, contact a Dream Town real estate consultant. Our agents can direct you to a network of top-notch lending professionals with a history of successful transactions in the Chicago area and other parts of Illinois.