Qualify for a mortgage





Mortgage loan qualification refers to the process of measuring the
borrowers’ financial ability to repay loan, of estimating the long-term value
of the property used to secure the loan and of estimating the borrower’s
willingness to repay the debt (credit record). These factors, ultimately, are
used to determine how much (if any) money will be advanced to a mortgage
applicant.

In general, lender needs to perform a credit analysis and evaluate the
subject property for every mortgage application. The first is associated with
the lender’s measure and perception of the risk on the loan to ensure the
structured mortgage term satisfactory to both lender and borrower. The
second is to provide the present worth (and possible future trends in value)
of the subject property from the point of view of a mortgage lender.

Basic information required from a borrower to qualify for a standard
residential mortgage loan is grouped as follows:

Characteristics of the applicants

  • In general, the information requested (and therefore thought to be
    useful in assessing risk) includes a statement for each of the persons
    involved in the application (including guarantors) of their full name, age,
    place of residence, occupation and employment history, the amount and
    sources of income and other revenue which may be used to repay the
    debt, the number of dependents and relationship to these, present
    wealth (i.e., savings, etc.) and indebtedness, and personal references.  
    In addition, the amount of equity (applicants’ capital currently invested,
    or to be invested, in the property) and sources of additional financing (if
    these are to be used) should be indicated.

Characteristics of the property

  • A statement of the civic address and legal description, dimensions,
    details of construction, servicing and associated fixtures and equipment,
    and the current real property tax and assessment are generally
    required.   

  • An appraisal report will generally confirm the estimated market value and
    lending value of the property. This estimate of value does not necessarily
    correspond to the purchase price, the assessed value for property taxes,
    or the market value.

The appraisal of the property and the investigation of the prospective
borrowers’ credit rating are of equal importance in the decision whether or
not to lend.
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