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5 Factors That Impact Mortgage Applications

There are a number of factors to consider when applying for a mortgage. Applicants will need to be aware of the impact there: credit score, employment history, down payment amount, savings and debt because of its influence on the approval. These factors are outlined below so applicants can better understand how the application is processed.

1. Credit Score

The most important factor that can impact a person’s mortgage application is their credit score. A credit score is vital to prove a person is capable of paying back borrowed. This proof is needed given the fact that the mortgage needs to be paid back to the lender through monthly installments. If the applicant’s credit score is low, then it may be an indication they are irresponsible with their finances and won’t be able to afford the costs.

A low score will be viewed as a risky investment by the lender if they don’t think you’ll pay the bill. Given the negative opinion lenders will form of those with low credit scores the amount that they approve the person for will likely be less when compared to those in good standing. Lenders will also increase the amount of interest and apply a shorter payment period for those with low scores to ensure they get back the money.

2. Employment History

Another factor that can influence a person’s mortgage application is their employment history. The employment history of a person is needed because it can be an indication of how reliable they are and how stable their flow of income is.

Lenders want to know the people they give money to are able to pay it back which is why they prefer applicant with consistent employment. In turn, resulting in a higher approval amount with less stipulations than those with an inconsistent work history.

3. Total Amount of Down Payment

Prior to applying for a mortgage, it’s important to confirm the exact amount that can be applied to the down payment because of the impact it will have on the application’s outcome. The down payment can have a significant impact on the application because it is used to determine how much money the person can afford to put towards a home.

Applicants that don’t have the down payment amount confirmed won’t know the price range of homes they can look at which can result in disappointment if they’re not able to afford the type of home they like. Therefore, the down payment will help determine the initial budget and monthly mortgage payments the applicant can pay.

4. Savings and Investments

The application for a mortgage can also be impacting by the amount of money a person has in their savings or investment accounts. These accounts can have an impact on the amount of money a person is approved for because it shows they have additional sources of income that can be used to pay the debt.

Failing to inform the lender of these accounts can result in disappointment if the approval is lower than expected. Ultimately, applicants with large sums invested in savings accounts are typically approved for a higher loan with low interest rates and bank fees.

5. Debt to Income Ratio

The final factor that can influence a mortgage application is the ratio of debt to income the applicant has. This ratio can indicate how much money a person realistically has remaining in their monthly budget to spend on payments. If an applicant’s debt amount is higher than their income the bank will likely deny the applicant given the inability to afford the bill in the future.

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