Home Loan Approval Essentials: What You Need To Know
Applying for a mortgage is one thing. Getting approved is another thing altogether.
If you are planning to buy a home through a mortgage, one of the most important things you need to do is learn how to get approved for a home loan. But what are the requirements to be approved for a home loan?
Here’s what you’ll need:
1. Proof Of Stable Income
First things first, for you to be approved for a home loan, one of the most important things you need to provide is proof of income. So you must produce W-2 wage statements from at least the last two years, recent pay slips that show your monthly income and a year’s income. In addition, proof of any additional income like alimony may be required and the two most recent years’ tax returns. These can help you get a good rate for your home equity loan.
2. Proof Of Assets
Another essential requirement for a borrower to qualify for a home loan is proof of assets. The borrower must have bank statements as well as investment account statements to prove that he or she has money to pay for the down payment, cash reserves, as well as closing costs. The down payment, which is usually articulated as a percentage of the selling price, varies depending on the loan type.
Many types of home equity loans in BC usually require that the borrower purchases private mortgage insurance [PMI], or to pay a mortgage insurance premium unless they are willing to put at least 20 percent down on the purchase price.
Other than the down payment, approval is also based on the borrower’s FICO credit score, the debt-to-income ratio [DTI], etc., depending on the type of loan.
3. Good Credit Score
Another essential for a home loan approval is a good credit score. Most lenders usually require a credit score of 620 or higher to approve a home loan and will place the lowest possible interest rates for borrowers with a credit score of 760+.
Borrowers with lower credit scores are required to make a larger down payment than those with higher scores. Borrowers with bad credit scores that have been told “no” by the bank still have a chance to get their loan if they work with trusted private lenders in Vancouver.
4. Employment Verification
Most lenders are not willing to lend borrowers without stable employment. That’s why they must ask for your employment verification. A lender will not only look at the borrower’s pay slip but also likely call the employer to verify the employment and salary of the borrower. And if the borrower has recently changed jobs, the lender may contact the previous employer. For self-employed borrowers, they will have to provide substantial additional paperwork regarding their business and income.
Private lenders in BC are not usually interested in the employment status of a borrower. They are open to all types of employment status. For example, people who are between jobs or have lost their jobs can still get private loans as long as they have enough equity in their property.