What Does A Lender Look At?
01 The Property.
What is the property worth? What condition is it in? What is happening in the local market? How much competition is there? Once you have an accepted offer, the lender will send out a neutral, third-party appraiser to determine the value of the property, and to confirm that what purchase price is on the contract is what the property is worth, based on all information readily available.
02 The Down Payment.
Are you “liquid” enough for a 10-20% down payment? Or do you qualify for an FHA loan with a 3.5% down payment? What about a 5% down payment? These are the important questions and conversations to have with a lender, as early into your property search as possible. I have lender contacts I can connect you with, or you can work with whomever you have rapport with.
03 The Seasoning.
Have you had that down payment on hand for a while? The bank will want to see that this is money you’ve been saving, holding, and not just received in a random fashion that would not meet their seasoning guidelines. HOWEVER, some loans, like the FHA, allow for gifts of funds for the down payment. That’s why we need to chat sooner rather than later.
04 The Income.
How do you get paid? How do you create income? Business income, investment income, job and career income, royalty income, etc, they need to see how and when and for how long to try to determine ability to maintain payment arrangements. Some lenders are more creative and flexible than others, so it’s important to connect with a lender that can maximize your financial realm in today’s marketplace.
05 The Credit.
What is your credit score? What is your debt-to-income ratio? Do you know? They both majorly impact how much you can afford in a house. If you have a lot of bills every month, even if you have high income, it can make what you qualify for much lower. This is why it’s always best to find out now and map out a plan for the future. Whether you buy now or 5 years from now, it’s helpful to know your options and be prepared.