If you’re looking to finance your dream home with a mortgage, you’re going to want to know the ropes about each and every aspect of the process — especially the approval process. As a borrower, the best thing you can do is stay in contact with your lender and keep yourself informed on the home loan lingo.
Here is some important info on underwriting, it’s components, and how all of this gets you approved!
What is Underwriting?
Underwriters work to examine all of your paperwork to determine your eligibility for the loan you have requested and the risk that they will have to take to loan it to you. They measure your power to repay the loan by looking over financial impacts like income, debt, and past history of borrowing. Nowadays, many underwriters work with software programs that scan your paperwork for accuracy.
The Three C’s of Underwriting
Thanks to Freddie Mac, the underwriting process has been made simple with three easy components. Credit reputation, capacity, and collateral are things that your underwriter will use to access your loan eligibility:
Credit Reputation — Your credit score, payment history, accounts, and more will help determine your loan eligibility. Your lender will use scores from reliable sources like Equifax, Trans-Union, and Experian to evaluate whether you are reliable and can account for previous loans and purchases. Credit surprises are no fun for anyone and according to a study commissioned by the Federal Trade Commission, one in five people have an error on their credit report! Be sure to always take a closer look at your report with your lender to make sure that everything is accurate, factual, and up to date. After all, your credit score may go up if a mistake is properly reported and removed.
Capacity — Debt-to-income ratio ensures that you have the capacity to pay back the loan you are requesting. This debt and income includes your monthly housing expenses, payments, salary, and self-employed income. This also takes into consideration the amount of borrowers included and the type of loan you’re requesting, and any additional income/liability items such as child support or social security income.
Collateral — This component takes into consideration the amount of money that you’re willing to put down on your new home. Have you been wondering how much you'll need for a down payment? Don't believe the 20% down myth - you can own the home of your dreams for as little as $99 out of pocket with qualifying financing through one of Highland Homes’ preferred lenders.
After all of these aspects are taken into consideration, you’ll be on your way to approval in no time! If you’re interested in finding a new home in Florida, you can get pre-qualified today with a Highland Homes preferred lender to determine your home purchasing power, get a personalized analysis of your credit and finances and start down the path towards home ownership!
For more information about our preferred lenders, new homes in Florida and additional home buying tips and information, visit the Highland Homes website or call our New Home Specialists today at 863-797-4999.
Please note, the information contained in this blog is provided as a courtesy and should not be solely relied upon for home buying advice or information. The information provided in this blog was accurate at the time of publication but has not been verified since. Please consult with your financial, tax, legal and/or real estate professional for more details.
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