What 3 Factors Impact Your Mortgage?
Your credit, income, and liquid assets all impact your mortgage qualification.
Today Jason Fallon from Movement Mortgage joins us to discuss the three factors that homebuyers should be prepared to discuss when getting qualified for a mortgage: credit, income, and liquid assets.
What should buyers consider when it comes to their credit?
They’ll want to focus mainly on their credit scores. Lenders will pull a tri-merge credit report that shows your scores from Experian, Equifax, and Transunion. Typically, mortgage lenders use the middle score for mortgage products. If you have a score of 640 or higher, you’re likely qualified for most loan products. If your score is below that, certain products won’t be available to you.
How do credit inquiries affect buyers’ credit scores?
Over the last 10 or so years, the major bureaus have added an element of transparency to the process. If no one has recently looked at your credit, a credit inquiry will have a very minimal effect on your score. If it has an effect at all, it might only be a couple of points.
"If you have a score of 640 or higher, you’re likely qualified for most loan products."
It’s also important to differentiate an inquiry from delinquency. Unlike delinquencies, inquiries don’t linger on your report for years; at most, they might last 120 days before they fall off as though they were never there. There’s only a limited window of time in which you might be negatively affected by a credit inquiry.
How are a buyer’s income and debt analyzed?
Mortgage lenders take your income and debt and use them to form a ratio that shows how much of your income goes toward paying off your debts. As long as your ratio stays below the threshold of around 40%, you would qualify for the mortgage product.
How do buyers’ assets come into play?
Some products can minimize a buyer’s out-of-pocket expenses when buying a home, but they’ll still need their own funds to do so. The assets mortgage lenders consider are liquid assets like stocks, bonds, mutual funds, investments, and similar things you can tap into when you need to.
Are there other ways that buyers can qualify for additional assets?
You could also use money granted from municipalities or gifted from relatives. For example, the city of Philadelphia just reenacted the Philly First Home Program, which grants qualifying first-time buyers up to $10,000 for their home purchase.
If you’d like to schedule a free consultation with Jason to discuss your mortgage questions, give him a call at (215) 327-2217 or email him at [email protected]
For any other real estate questions, don’t hesitate to reach out to us here at the Geddes Team. We’d love to hear from you.