Understanding california refinance second mortgage california home loan
Maximize Your Chances of Qualifying for a Great Mortgage Loan DealMost mortgage loan advertisements promise rock-bottom interest rates, low down payments, and virtually guaranteed approval within just a few days. But for many prospective homeowners, the trip from advertising promises to sign-on-the-dotted-line reality can be a long and confusing one. Is it all just one big roll of the dice or are there quantifiable factors that a lender uses to qualify you for a loan and determine your interest rate? Lets take a look and see. Understanding mortgage rate advertising campaigns Generally the qualifications for these almost too good to be true low interest mortgage programs are quite high. Many are so high that most people who respond to the advertising wont qualify for them. Why do lenders even bother spending money on advertising a mortgage program that most people cant qualify for? Mortgage promotions bring in large numbers of applicants. Some will qualify for the promotional rate and others will not. The lender hopes to place everyone who applies into some mortgage program that they offer even if it wasnt the one the borrower responded to. Navigating the Home Mortgage Qualification Process The lender reviews your credit and overall financial condition when qualifying you for a particular mortgage program. Most lenders consider these items:
The credit investigation causes borrowers the most concern and thats probably because its the most misunderstood of the approval steps. There is nothing secret going on here and mortgage lenders are very up front about what they will be checking. Shining the light on your credit history Credit bureaus use a rating of zero through nine for each of your credit lines. They put either an I (for Installment loan) or an R (for Revolving loan) in front of the number. I0 or R0 indicates that the credit line is too new to rate. I1 or R1 is the best rating and R9 or I9 is the worse. This worked fine for years until credit usage became more widespread and the amounts borrowed became significantly greater. Thats when lenders began looking for a statistical model which could predict how you would perform on a loan based upon measurable factors. This evolved into the FICO score which plays a prominent role in determining if you get a home mortgage as well as what the terms of the mortgage will be. FICO stand for Fair Isaacs Corporation, the name of the company that developed the software that calculates the score. FICO scores can range between 250, the highest degree of risk and 850, the lowest degree of risk. All else being equal, the higher your FICO score the better the loan terms will be. Taming your FICO Score If you are turned down for a loan, or are required to pay a risk premium because of your FICO score, all is not lost because you can improve your FICO score. Since you are never going to be approved for a mortgage if your FICO scores are so low than lenders are scared away, it is worth trying to get your score up. If you were given a mortgage at a high rate because of your score then its worth raising your scores and refinancing for a lower rate in the future. How your FICO score is calculated. 10% is determined by the number of open credit accounts that you have and the mix of types (revolving, installment, and mortgage). 35% is derived by measuring your repayment history and looking at adverse credit items such as foreclosures, judgments, bankruptcies and negative public records including tax liens and wage garnishments. 30% is based upon a formula that includes your balance due across all open loans, the types of loans and the number of loan or credit card accounts that have an open balance. 15% is based upon the length of you credit history or how long you have had a credit history on file. 10% is based upon the amount of new credit in your account including how long it has been since you opened a new account, how long since your last new credit inquiry and how good your most recent credit history is . Heres how to improve your score:
Additional ways to improve your chances of getting approved. While your FICO score is the key determining factor in getting approved for a home mortgage, there are some other factors which affect the approval process. Show good prospects for continued employment If your job prospects are a bit hazy then a lender may choose not to fund your mortgage even though you have high scores. Try not to change jobs within 6 months of applying for a mortgage if you can possibly help it. Have a large down payment Although some mortgage lenders advertise low or no down payment programs, they are the exception to the rule. Most lenders want to see 20% down. If you have less, then you may get passed over or, at the very least, be required to pay expensive PMI (Personal Mortgage Insurance) each month until you do have 20% equity in your home. Stay in a realistic price range Dont try to buy more house than you can comfortably afford. A lender is inclined to say no if he sees that too much of your income is going to be taken up by your mortgage payment. Be Honest Dont try to hide any bad news including a pending job layoff, strike, etc. If you lie to your lender you probably will get caught. Now that you know all about the mortgage approval process, are you ready to buy a new home? It can look like a complicated process, but you can do it if you have your financial affairs in order. About the Author Copyright 2005 by Best-Internet-Mortgage-Loans.com. Please visit Best Internet Mortgage Loans for more on mortgage basics and tips on finding the mortgage you seek. This article may be freely posted as is on the Web as long as this message and the live link remain intact. More Useful Resource and Updates on california refinance second mortgage california home loan
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