The Big Four

Mortgage 101 | March 17, 2023

When it comes to getting a mortgage, there are four key factors that borrowers need to consider.

Credit score, down payment, debt-to-income ratio, and employment history. These factors are often referred to as the "Big 4" of getting a mortgage, and understanding how they impact your ability to obtain a mortgage is crucial.

The "Big 4" of getting a mortgage are credit score, down payment, debt-to-income ratio, and employment history. By understanding these factors and how they impact your ability to obtain a mortgage, you can better prepare yourself for the mortgage application process. It's important to take the time to review your credit report, save for a down payment, and make sure that you have a stable income and employment history. By doing so, you can increase your chances of getting approved for a mortgage with favorable loan terms.

Credit Score:

Your credit score is one of the most important factors that lenders consider when determining your eligibility for a mortgage. A credit score is a number that represents your creditworthiness, and it is based on your credit history, including your payment history, amount of debt, length of credit history, and types of credit accounts. Generally, a higher credit score will result in better loan terms, including a lower interest rate and lower monthly payments.

Debt-to-Income Ratio

Your debt-to-income ratio is a measure of your monthly debt payments compared to your monthly income. This includes any credit card payments, car loans, student loans, and other debts you may have. Lenders use your debt-to-income ratio to determine your ability to make your monthly mortgage payments. Generally, lenders prefer a debt-to-income ratio of 43% or less. However, some lenders may be willing to work with borrowers who have a higher debt-to-income ratio, depending on other factors such as credit score and employment history.

Down Payment:

The amount of money you are able to put down on a property can impact your ability to obtain a mortgage. Most lenders require a down payment of at least 20% of the purchase price of the home. However, there are some loan programs that allow for a lower down payment, such as FHA loans or VA loans. A larger down payment can result in a lower interest rate and lower monthly payments, but it can also make it more difficult to qualify for a loan if you don't have enough cash on hand.

Employment History

Your employment history is another important factor that lenders consider when determining your eligibility for a mortgage. Lenders want to see that you have a stable income and a steady job history. Typically, lenders prefer borrowers who have been employed for at least two years with the same employer. However, some lenders may be willing to work with borrowers who have recently changed jobs or are self-employed, as long as they can demonstrate a stable income and good credit history.

The "Big 4" of getting a mortgage are credit score, down payment, debt-to-income ratio, and employment history. By understanding these factors and how they impact your ability to obtain a mortgage, you can better prepare yourself for the mortgage application process. It's important to take the time to review your credit report, save for a down payment, and make sure that you have a stable income and employment history. By doing so, you can increase your chances of getting approved for a mortgage with favorable loan terms