Is it Harder to Pre-Qualify vs 2 Years Ago?
Some would say much harder. I would agree and disagree. …Here is why. Let’s put aside the appraisal issues, the mortgage insurance issues, credit scores, and several other factors, because those would be some of the main reasons why it is harder to approve someone. I just wanted to dwell on the basics that so many seem to forget or overlook.
When I ask which came first, the chicken or the egg, the basic point that I would like to make is whether a borrower should be qualified to the maximum purchase price or the payment that they feel most comfortable with. There would be many arguments that would defend both sides. But let’s think about this for a moment. It’s all about qualifying ratios and assets. It’s very simple.
Some are using 30/40 ratios for a quick check, which would be 30% of gross monthly income for housing expense and 40% when considering all debt. The normal conventional ratios are 28/36 and for FHA loans, they are 31/43%. But let’s not stop there. Some also want to know about the buyer’s assets also. For example, if one had 10% to put down, and met these ratios, qualifying the borrower would not be rocket science.
Consumers and real agent agents alike can make these simple ratio checks with a few answered questions to help determine a rough payment amount so in so ways qualifying today is as easy as it has been in the recent past. Thus by doing this self qualification one can determine if the investment of time driving around all day looking at properties is really worth it. If you don’t fit the basics then prior to going any further in your house hunt it would best to get fully pre-qualified by a reputable loan officer before proceeding. However, let’s take the qualifying issues a little further.
Top 10 Questions to Assure a Successful Qualification
- How much of a mortgage payment would you be comfortable with? A payment range, to include taxes & homeowners insurance.
- Are you buying the property as a primary, 2nd home, or investment property.
- Is the property a single family home, condo, duplex, etc?
- How long have you been on your current job.
- Are you hourly, salary, or self-employed. (how are you paid – twice a month or every two weeks)
- Do you pay or receive child support/separate maintenance.
- Have you had any bankruptcies or foreclosures in the last 7 years.
- 2 part question – What are your total assets to include checking, savings, 401-k, stock options, etc. And how much of this do you want to use.
- Do you rent and or own – how long have you been there. Do you pay by check, cash, money order. And have you ever been 30 days late in the last 12 months.
- Have you pulled your credit report in the last month and if so,what is your credit score.
Major Issues Why Many are Denied in the Last Minute?
In my experience it is realated to Questions 5, 6, 7, and 10. It truly comes down to so many loan officers that don’t know how to accurately calculate income and to properly read a credit report. This is my opinion, but I have closed many loans in the last 2 years that were denied last minute by other lenders due to these two issues alone. And yes, I still got them to close.
Guest Author: Jeff Bolonger