What May Stand Between You and Getting a Mortgage

What May Stand Between You and Getting a Mortgage

If you or someone you know has been in the housing market recently, it’s likely you’ve experienced or heard that the process of getting a mortgage can be tough. Since the housing bubble burst (due in large part to just about anyone with a pulse qualifying for loans), the process has become much stricter.

There are several things that may stand between you and getting the mortgage you need to buy the house of your dreams. Following are 5 to consider:

1. More Cautious Lenders

After endless foreclosures, a recession, and bailouts, the last thing the banks want to do is repeat what happened in the mid-2000’s. As a result, they’re opting on the side of caution when it comes to lending money these days. Today, you’ll discover that lending standards have gotten much stricter then they were a few years ago. Whether you’re a first time home buyer, or you’ve done this before; there is a wonderful resource for the latest information regarding the home buying process. Click here to be directed to The 2 Mortgage Guys page of informative videos.

2. Tougher income standards

If you work two jobs to support yourself, that second job may not matter to your lender. Unless you’ve been making that money from one employer for at least a year (or in the same industry for at least two years) — without going more than 30 days between paychecks — your lender is going to disregard it. That means you’ll be left to qualify on what you make at your primary job, and that may not be enough.
And, if you work in a job where you get at least some of your money in cash — like tips, for example — it can be fairly difficult to track and include as income. If you have questions regarding income standards, click here to submit your question.

3. Your credit report

Even if your credit report is good enough to get you pre-approved for a mortgage, you better work hard to keep it that way. If you make big purchases before you close on your loan (like, for example, if you go out and buy a bunch of new furniture in anticipation of moving into your new house and put everything on your credit card), it can totally change the rules of the game. After all, those new purchases are really just additional debt. How does that affect your mortgage? Your lender may decide to charge you a higher rate (after all, an increase in debt makes you’re more of a risk). Or, if you were just barely able to get approved before, your additional debt may be enough for your lender to pull your loan altogether. If you have not yet been pre-approved, or you aren’t sure where your credit scores stand; we would be happy to assist you! Click here to be directed to our application page. You can fill out a short, secure online application and we can then help you by determining your 3 credit scores, for free!

4. Your car payment

If you’ve got a shiny new car sitting out in your driveway, it may actually prevent you from buying a shiny new house (complete with a roomy garage to park it in!). That’s because lenders take all of your debts into account when they’re deciding whether or not to approve your loan application. In order to qualify, all of your debts (including your soon-to-be mortgage payments) have to make up less than 36% of your gross monthly income (the money you make before taxes). So, if you’re paying $500 or $600 for that brand new luxury sedan, a mortgage payment may put you way over the 36% threshold.

5. Your recent short sale

If you got caught up in a housing nightmare after the bubble burst, you’re certainly not alone. However, if it’s been less than two years since you sold your old home in a short sale, you won’t be able to qualify for a mortgage — and that’s assuming you’re getting an 80% loan-to-value ratio. If you want a 90% loan-to-value ratio, you’ll have to wait four years before you can qualify for another mortgage.
Even if you try to get a FHA loan (meaning that the mortgage is insured by the federal government, so there’s less risk to your lender), you’ll have to wait three years after your short sale.
Even after you make it through the mandatory waiting period, you’ll still have plenty of hurdles to jump. Chances are, lenders are going to ask you a lot of questions about your prior situation and whether it may affect your potential loan.


DISCLAIMER: Neither Indiana USDA Mortgages (IndianaUSDAmortgages.com) nor Luminate Home Loans is affiliated with any government agencies, including the USDA.

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