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Qualifying for a Loan
Getting a loan is the key solution when you need to invest large amounts of money you currently don’t dispose of. The most common situations that result in loans are buying a home with the help of a secured mortgage loan, paying off debt, financing a higher education or starting a business of your own.
There are two major types of loans:
● FHA (Federal Housing Administration) loans
The Federal Housing Administration insures this type of loans. If your credit score is around or below 620, the FHA financing is a better option than the conventional financing, because it offers better terms and rates.
● Conventional loans
This kind of loans are the ones that are not insured, nor guaranteed by the federal government or any other government agency. Conventional mortgages are more convenient for people who do not dispose of a down payment, or have a limited one. This type of mortgage also offers you the possibility to get a loan only by stating your income, without any documents required. It is important to ask the services of a mortgage broker in order to choose the type of loan that best applies to your needs, as both mortgage types offer convenient programs.
It is quite simple to obtain a loan, but you ought to always inquire about the set of criteria the lender uses in order to determine if you qualify for a loan. When you know all the details, you are ready to apply for a loan and to have your borrower position settled. The amount of money you can qualify for is also decided by the lender, according to your personal financial history, possibilities and needs.
The set of qualifying criteria for getting a loan involves two main items:
1. Your ability to repay the loan
2. Your willingness to repay the loan
The ability to repay the loan Here’s how it goes: the lender checks your current employment. It is usually necessary to have a minimum of two years of steady employment, preferably in the same field. Apart from the fact that a stable workplace gives you a trustworthy, serious image, it also means that you have a steady or a growing flow of monthly income. It is expected of your income to be at least twice or three times as high as the potential mortgage payment you will need to pay monthly if you get the requested loan. To be sure of this, the lender checks if you have other loans and debts that you still need to pay, and these debts are compared to your income. This process is called the debt-to-income ratio. After checking all these things, the lender is assured that you are financially able to repay the loan. A great plus in easily obtaining a loan is liquidity. Any available funds that you have, meaning any kind of money savings are a great advantage.
The willingness to repay the loan Another thing the mortgage lender is interested in, is your credit history. Before applying for a loan you should first check your credit score, in order to improve the appearance of your financial situation, before the lender’s investigation begins. The higher your credit score is, the higher are your chances to get the desired loan. Therefore, it is important to pay as many debts as possible before applying. Your credit worthiness is measured according to your past debts and payments. So, you should be very careful to check all these details before your credit report is made by the lender.
It is essential to patiently follow all these steps in order to successfully qualify for a loan. Requesting professional help is a great idea if your prospects are not very ‘shiny’, because nowadays the market has various possibilities and programs to offer, so you can quickly and safely get a loan even under complicated circumstances. When you are well-informed and you have your priorities wisely set, you can easily find the most convenient offer and get the loan you need.
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