If you are shopping for a mortgage, your credit score is one of the first things mortgage lenders will look at — but it’s not the only thing.
When deciding whether to approve a mortgage and setting an interest rate, mortgage lenders prefer to see an applicant’s complete financial profile. So, when working with a mortgage lender in Granite City, Illinois, you should be prepared to share more than just your credit score.
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Credit History
A credit score is a three-digit number — calculated from the information in your credit reports — that analyzes your ability to repay a loan. However, a credit score does not tell the whole story, so your mortgage lender in Granite City, Illinois, may also pull your credit reports from the three major credit bureaus, namely Equifax, Experian, and TransUnion.
Credit reports include your credit history, which is a record of how you have handled debt payments in the past. When reviewing your credit history, lenders may look for delinquent accounts, unpaid collection accounts, outstanding debt, recent credit requests, and more.
To check your credit history visit Free Credit Reports | FTC or Consumer Financial Protection Bureau (CFPB) to learn how to request your free credit report by mail.
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Income and Expenses
If you have a good income, your Granite City, Illinois lender will probably not consider you a risk because you are more likely to pay all your mortgage payments on time every month. On the other hand, if your fixed expenses — such as your car payment — are particularly high, a good income may not help you get a lower mortgage rate.
Your total debt-to-income (DTI) ratio must be 43% or below when taking out a mortgage through the Federal Housing Administration (FHA). However, lenders might give you some leeway based on your credit score. If your credit score is “good,” they may accept a higher DTI ratio of up to 50%.
Down Payment
The lower the amount you are borrowing, the lower the risk to the bank.
This means that if your credit profile is shaky, a sizeable down payment may help you qualify for a mortgage. Furthermore, your lender is more likely to be generous with the mortgage rate if you put down a large chunk of the price of your Granite City home.
It should be noted that securing a slightly lower interest rate may not be worth emptying your savings account. It is important to save enough money in case of an emergency.
Loan Term
Lenders generally assume that a shorter mortgage term means that the borrower’s ability to pay will vary less over the term. Remember this when applying for a mortgage for your home purchase in Granite City.
If you can afford a shorter-term mortgage, go for it — your monthly payments will be higher, but you will pay less interest over the mortgage term and will own your home sooner.
Employment History
If you are taking out a mortgage, your current salary may be enough to qualify for a favorable interest rate. However, the lender may choose to look at your income over the last year or two to ensure your income stability.
If you have a shaky employment record or have just been unemployed, your mortgage application may not be denied, but you may not qualify for a mortgage with a lower interest rate.
Partner with a Reputable Mortgage Lender in Granite City, Illinois
If you’re looking for the top-rated mortgage lenders in Granite City, Illinois, Compass Mortgage is the company to call. You can connect with our home loan specialists to learn more about how you can improve your chances of securing a mortgage with favorable terms. To get started, contact us at (877) 793-9362 or submit a contact form through our website.