In Colorado, potential home buyers must seek the right financing before they start a real estate purchase. To acquire financing, they must submit an application with their preferred lender. The lender reviews vital factors about the borrower to determine what loan products are available to them. After an assessment is completed, the broker presents the borrower with mortgage offers.
The Borrower’s Credit Scores
The borrower’s credit score defines what mortgage loan products are available to them. The lender assesses all three credit scores to determine what option meets the borrower’s unique financial status. However, the borrower’s credit scores must meet at least the minimum for the selected mortgage program. Typically, the minimum is between 580 and 620.
The Borrower’s Earning Capacity
The lender must verify the borrower’s income. They must review the borrower’s income to determine if they could make the mortgage payments on time. The borrower must be financially stable to acquire a mortgage. They must present evidence of a stable income as well as banking information for the verification process. The borrower must provide earning statements as well as bank statements when applying for a mortgage.
Income to Debt Ratio
The borrower’s income to debt ratio is also assessed. This value determines whether or not the borrower’s debts exceed their income. The preferred income to debt ratio for acquiring a mortgage loan is 43%. This designates that their debts don’t exceed one-half of their income. If this is the case, the lender can establish affordability for the borrower.
The Borrower’s Work History
For most lenders, the borrower can qualify for the mortgage loan based on their work history. The borrower must be employed with the same company for at least six months to qualify. The borrower’s work history is verified by the lender through the borrower’s current employer.
In Colorado, potential home buyers seek the right financing based on specific criteria. This includes their credit score, earning capacity, income to debt ratio, and work history. The lender reviews these factors to establish affordability and approval.
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