Mortgage Loan Qualifying

By misusing these terms, lenders and real estate agents misrepresent buyers to sellers. Potential buyers may have the wrong estimation of their potential as well. All of this does tend to lead toward problems closing loans. Taking much longer than anticipated to close or not closing at all can be eliminated by understanding these two terms completely.

PreQualifiying A Buyer Adequately

It takes a little more than a few questions answered in a few minutes to fully pre-qualify someone for a mortgage. There has to be a tri-merge credit report, where all three major credit reports are displayed with all three credit scores. Usually, the middle score of all three is the determining score. Then the credit report has to be analyzed for derogatory items, their severity and history, as well as the amount of positive credit history.

Debt To Income Ratio

Credit alone is not enough. The minimum payments showing on the report have to be added. That sum is added to the projected monthly loan payments for the level of house sought. These monthly totals are then compared to the monthly gross income, which is one's pay before taxes and other items withdrawn. An examination of the details on a recent pay stub will be sufficient to determine this accurately. For self employed types, the adjusted gross income (AGI) of the last tax return divided by 12 can be used.

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