What Are Mortgage Lenders Looking For?
Lenders look at a few different factors when you apply for a loan. A good way to remember what mortgage lenders look for is to use the acronym “IPAC,” which stands for “income, property type, assets and credit.” Let’s look at each of these factors in a little more detail.
Income
One of the first things that mortgage lenders consider when you apply for a loan is your income. There is no set dollar amount that you need to earn each year to be able to buy a home. However, your mortgage lender does need to know that you have enough money coming in so you’re able to pay back your loan.
Your lender will want to look at your employment history, your monthly household income and any other forms of income you have coming in, like child support or alimony payments.
Property Type
The type of property you buy affects the type of loan you can get. This is because different types of property change the level of risk for your lender. Want to buy a small single-family home that you plan on using as your primary residence? You’ll probably get better terms because lenders know that housing costs already factor into most people’s budgets and you’re more likely to stay up to date with your payments.
Investment properties, on the other hand, are riskier for lenders because investment property mortgage payments will take a backseat to primary residences if the owner runs into financial hardship. Expect your lender to require a larger down payment and a higher credit score before you get a loan for an investment property.
