Mortgage lenders want to determine two things from a borrower: (1) How much risk do they pose? (2) How much loan can they afford?
As a borrower it will feel much less like an interrogation if you know what questions to expect and how to provide the appropriate information. Different mortgage lenders ask different details, but you can expect all of them to ask about your income, assets, and debt. Below we go into all three of the big questions.
WHAT IS YOUR EMPLOYMENTS AND INCOME?
- Where do you work?
- How long have you been at your current job?
- How much do you earn each month, before taxes?
- Do you have any other sources of income?
You should have proof of about two years’ worth of income at the ready. Come prepared with pay stubs, copies of checks, paid independent contractor invoices, and other documents that verify your employment. Be sure to disclose any other sources of income, including child support or alimony.
WHAT IS YOUR CURRENT DEBT?
- What recurring debts do you have?
- How much do you pay a month for auto loans and credit cards? (You might be asked to document your recurring debts by providing copies of your bills.)
Generally, the more debt you have the harder it is to get a mortgage loan. However, your debt alone is not what is factored. Your income also comes into play and you are given a debt-to-income-ratio.
The debt-to-income ratio measures how much of your gross (before taxes) income is used to pay housing costs, including principal, interest, taxes, insurance, mortgage insurance (if applicable), and homeowners association fees (if applicable).
Other debt, including credit cards, student loans, and car loans, will also affect your debt-to-income ratio.
WHAT ARE YOUR ASSETS?
- How much money do you have in the bank right now?
- Do you have enough to cover your down payment and closing costs?
- Do you have enough to cover the first two (or more) months of mortgage payments?
- How long have the funds been in your account? Are they sourced and seasoned?
Your lender wants to know about any cash reserves you have. A balanced investment portfolio demonstrates that your investment planning and goals aren’t solely pinned on a home value appreciation. These are also resources that can be tapped in an emergency in case you need money for a mortgage payment.
Stonebridge Mortgage Group can help you with your real estate loans and other mortgage solutions, both residential and commercial. We serve the greater Portland area and are located in Gresham, Oregon.
Call us today at 503.661.5580