The mortgage industry is continually evolving and it is important to be especially mindful of your finances when you are going through the home buying process. Before you start the purchase process you should be aware of some of the top things that could possibly keep you from getting a loan approved.
One of the most important things lenders have to review in order to qualify a borrower is the debt-to-income ratio (DTI). Your DTI determines the amount of debt divided by gross monthly income. Typically this figure needs to be at or below 45 percent to qualify so if you are above this number you will need to work on paying down debts to qualify.
Verifying income is another important piece of the qualifying puzzle. Lenders will be reviewing your bank accounts to confirm you have the ability to repay the mortgage. One issue that can arise is if you have frequent cash deposits that have no paper trail. This is a red flag in the mortgage industry as all deposits and money transfers must be sourced.
While we’re on the subject of income, if you plan on using gift money and you deposit it without following the proper instructions this can be a big issue. Once again all deposits must be sourced and gift money especially has special instructions for depositing which you can get from your loan officer.
One major thing you should avoid while going through the home buying process is to not overspend on a house. A lender will qualify you for a certain loan amount but that doesn’t mean that you have to spend that much. Work on a budget and stick to that number so there is no payment shock later on. If you need a mortgage pre-approval please don’t hesitate to contact me.