Why and how to get a mortgage checkup
An annual mortgage checkup may help maintain your financial health.
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One of the first questions many homebuyers ask is, how much can I afford?
Buying a home is one of the biggest financial decisions you’ll make, and you will want to stay within your budget.
Many factors affect the price range you should consider, including the size of your down payment and the loan amount you may qualify for, the types of loan options available to you, your current debts and credit history, and the property value of the home you are considering.
Your lender wants you to be a successful homeowner, and so to assess whether you qualify for a mortgage large enough for the home you want, he or she will consider your entire financial picture.
First, lenders want to know that you have a source of income to make monthly mortgage payments. Income can come from primary, secondary, and part-time jobs, as well as overtime, bonuses, and commissions.
You may use other sources of income if you want them considered for payment — including retirement or veteran’s benefits, disability payments, alimony, child support, and rental or investment income — provided they can be verified as stable, reliable, and likely to continue for at least three years.
Your lender will also examine your current debts, payment habits, credit history, and credit score. They want to confirm that you pay your bills, loans, credit cards and other debt on time and that you don’t have excessive levels of outstanding debt.
It’s a good idea to check your credit history and correct any problems before applying. You can get a free credit report annually at www.annualcreditreport.com.
Your lender will also review your assets and available funds to see if you have enough for a down payment and closing costs.
You may use funds from a savings account, certificate of deposit, investments, or retirement fund.
In some cases, you may be able to use a gift from a relative, friend, employer, or not-for-profit organization.
In many cases, you will also have to demonstrate that you have additional funds in your accounts to cover several months of mortgage, tax, and insurance payments.
And finally, your lender will look at the property itself to verify that it’s worth the purchase price.