Getting A Mortgage Could Be Easier Than You Think
Getting approved for a mortgage can seem like an act of God, but when you finally understand each step, you realize it’s not really as hard as you think. I like to help people understand these steps by using logic to teach. Let’s set the table here….
Let’s pretend YOU are the bank and a stranger is about to ask you for a $100,00 loan to buy this house…
What kind of factors would you consider to make sure this stranger was financially responsible enough to ensure you would get your money back?
MINIMUM CREDIT SCORE
A credit score would be the first factor to consider because it is a three-digit number that rates your financial responsibility to be able to pay back loans lent to you on time. You would make sure the person you are loaning money to has AT LEAST a minimum credit score of XXX.
What is that score?
Well, believe it or not, the average “fair” score to obtain a mortgage is about 620.
Say WHAT?!?!?……. Why so low you ask? 2 main reasons….
- A mortgage is a bill a person is most likely to pay because we all need protection and shelter.
- The house isn’t going anywhere! Unlike a car loan where a car can be moved, stolen, or could be involved in a crash and lose all value.
Therefore, a mortgage is a safer loan to give.
Second, you would want to make sure that the person you’re loaning money to really does make the money they say they do.
You, as the bank, can expect to collect recent pay stubs, 2 or 3 years of filed tax returns, and possibly even 6 months of bank account statements. This will ensure that the person truly does make enough money to pay the monthly mortgage payment, and also have enough to pay the down payment and cover the closing costs required to purchase the home.
VALUE OF THE PROPERTY
Lastly, you would want to make sure the property is WORTH the money you are lending. Why?
If you are lending money to someone, you would be doing so for ONE reason only… and that is to make money WITH YOUR MONEY. A bank is no different. In a scenario that the person stops paying the mortgage, your only recourse is to take the property back, and resell it to another person so that you can recoup your money. This is called foreclosure in the real estate world.
It’s not difficult to get a mortgage if you understand the main basic steps and can afford to do so.
There are obviously more factors to consider, such as DTI, the types of mortgages you may qualify for (FHA, Conventional, VA, USDA loan), what kind of credit score banks will pull (yes, there are many)…
Reach out to us at BNBCREDITBUILDERS. We work with the best mortgage brokers in the country who can get you fast and easy approvals.