How Lenders Determine The Loan You Qualify For

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Today, we are talking about loans. The purpose of this blog post is to make sure you know how a lender decides the maximum loan amount that you are available to qualify for. There are really 4 major things that mortgage lenders look at when they are determining how much of a home you can afford. Knowing what lenders are looking for in advance will surely allow you to get your finances in order so you can qualify for the loan you desire. Here are the 4 things that lenders are really keeping their eye on:

1. Income
The first thing lenders will look at is your income. They want to look at what your household income will be. If you have been at the same job for over 2 years, that is a good thing for lenders. It's a bit more of a longer road if you are self employed.

2. Credit History
Lenders will look at factors such as how you are with paying your bills on time, or if you have had any delinquencies as far as credit goes.

3. Debt-to-Income Ratio
The next thing lenders will check is your deb-to-income ratio. They want to know how much money you owe vs. how much you make. You will want to make sure your debt is as low as it can be.

4. Down Payment
Finally, they will see how much money you have to put towards a down payment. 20% down is typical for a home, but the lender will make sure they know what you can afford to put down.

We like to let our clients know that even though sometimes, on paper, you will qualify for more than you are comfortable with, you do not have to purchase the maximum amount. You should be comfortable with your monthly payments and be sure to communicate that with your mortgage lender.

If you have any questions, or are looking to buy/sell/invest in real estate in Austin, please give us a call. We would love to help you!

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