Qualifying For Your Home Loan

Do I need a job to qualify for a mortgage loan?
Believe it or not, there are lending institutions out there that will give you a mortgage loan without a job. However, you are definitely going to pay for it with a very high interest rate and, at the end of the day, do you really want to be getting more into debt when you don't have supplemental income coming in to support it? So, yes you can qualify for a mortgage loan without a job; it can be done, but I do not recommend it.

What factors will a lender look to in deciding whether to give me a mortgage?
In deciding whether or not to give you a mortgage, the lenders are going to look at: your income, whether you're salaried or self-employed and what kind of income you're making; assets, how much money you're going to put down for a down payment or how much reserves you have sitting in your bank account; your credit, what your credit score is on the debt you have; and last but not least, the property, what's the value of the property, the location of the property, what kind of mechanical liens are attached to the property, and that kind of thing.

How relevant is my salary to a lender?
Your salary is very relevant to a lender because we take what's called "debt ratios." We take what's called your "Principal, Interest, Taxes and Insurance" divided by your gross income; that's what called your "front-end debt ratio." Your back-end debt ratio is, once again, your PITI plus any monthly debt that you have, and we divide that by your gross income. Those are debt ratios, and they usually need to fall in between 28 to 36. So, yeah, you definitely need to have the income to support the mortgage that you want to obtain.

I am self employed what will lenders accept in place of a pay stub?
Nowadays regarding the self employed individual, the lending institution realized they were missing out on a very large market segment. What I mean by that is most self employed people usually have a lot of expenses to write off, and the lending institution, that underwriter of the bank, are just going to take what's on your tax return down at the bottom; what's called your adjusted gross income. So you might make $500,000, but on your adjusted gross income, it's only going to show you make $50,000. Therefore, if you're self employed, you need to go stated, and once again, most banks nowadays don't hit you very much as far as an interest rate if you have to go down the stated route.

Will lenders look at my bank accounts?
We do usually collect the last three months of bank statements to verify that the money has first of all been seasoned, meaning it's been sitting in your bank account for a few months. They are then going to take a look at any large deposits and any large withdrawals. But overall yes, they definitely want to look at your bank statements.

What can I do if I am rejected for a mortgage loan?
Well, if I'm talking to you as a mortgage broker and you get rejected for a mortgage loan, then unfortunately you just cannot qualify for a home at this particular time. I can go out to lending institutions for a mortgage loan, whether it's A-Paper borrower (it's called Alt-A), or subprime lending. I can do 100 percent financing. If I can't get it done, then once again, you either need to find a co-borrower, save up more money, or get a better job before you go out and try to look for a home.

How do I calculate monthly payments?
There are a lot of Internet programs that would do that for you, but if you give me a call, I can walk you through what the principle is on an interest payment, what an interest only payment is, and I can even tell you which type of calculator I use to allow you to calculate your own monthly payments.

What is included in a monthly mortgage payment?
In a monthly mortgage payment, one of two things will be included. If you've got a principal and interest loan, then it'll be the principal payment with the interest only payment. Or you can do an interest only payment, and that's all you'll have.

How much of my monthly payment is considered interest?
Usually for the first five years upon obtaining that mortgage, a very small amount will be applied towards the reduction of balance on your monthly payment. The majority of money is going to the interest payment for the first four to five years.

How much of my monthly payment is considered principal?
For the first five years, in a 3-year amortisation loan, the majority of your monthly payment is going to interest, to pay off the bank. Over a longer period of time, you'll start to see a much larger reduction in your principal payment.

Are "regardless of bad credit" loans a scam?
No, "regardless of bad credit" loans are not a scam. Nowadays, there are what are called subprime lending institutions that, if you do have a credit score at 520, or 540, you can still get mortgage money. You are definitely going to pay a higher interest rate, but it can be done. There are plenty of lending institutions out there nowadays that can give you a mortgage loan, even if you have credit issues, mortgage lates, credit card lates, or bankruptcies. I know a few banks I can go to right now with whom, if you're one day out of bankruptcy, I can get you a loan.