When a lender determines your credit risk, yes they pull your credit report along with your credit scores. This is the first step in the qualifying process. There is also other attributes lenders look at as well. In this article I wanted to discuss some other factors that are important in the decision making process with lenders.
Job history
Having good work history is considered stability. If you are someone that jumps from job to job, this could affect the decision process on getting a loan. In some instances good job history could be considered a compensating factor when other areas of your overall credit picture may not look too good. Underwriters also like to see at least 2 years work history to buy a house. If you have gone to college and graduated, and now have full time employment, the time you were in college can be counted as work history with some loan programs.
Rental or Mortgage history
Typically lenders like to see at least 12 month good rental history. This shows you may have the ability to handle a mortgage payment or any other obligation. Some creditors like to see that you also own vs. renting. All of this just shows your ability to handle debt.
Have a checking account or savings.
Creditors also like to see that you have a checking account. This way they can see what you are doing with your money. Lenders like to see that you have the ability to save money. Here are acceptable forms of savings.
· 401k
· Stocks
· Mutual Funds
· Annuity
· Money Markets
· Regular savings account
Savings in the eyes of lenders is a plus. This not only shows that you have the ability to save, but if something comes up you can continue to pay your obligations.
Full time employment
Lenders like to see that you are working full time. They want to see some consistency in the hours you are working. If you are part-time and don’t a history with this employer, they might deny the loan due to lack of work history.
How many dependents
Some government loans take in account how many dependents you have. This could cause you not to get approved depending on your number of dependents and income. This loan is called V.A loans.
How much debt you have
Your income to debt ratio is a big factor in the qualifying process. If you apply for a loan and are overwhelmed with debt, you may not qualify. You should keep your debt as low as possible.
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