Friday, April 15, 2016

When you're looking for the best rate on a home loan, it's important to know what lenders are looking for. Read on to learn how to think like a lender.

When doling out home loans, lenders are looking for telltale signs as to whether or not you will be able to make your payments. While these signs vary, the five key things lenders look for are:

• Steady employment
• Down-payment capabilities
• Good credit
• A consistent savings history
• Steady spending habits

These are the major signifiers that tell a lender you're capable of repaying a loan. And the red flags? See below: 

• Frequent job changes, especially those without salary increases
• Recent self-employment in a new venture
• Bad debt or credit history
• No previous borrowing record

If you have any of these flags on your back, don't be discouraged. These are standard lender pre-dispositions when evaluating your application, but when it comes to making a loan decision, most lenders will tell you nothing is completely carved in stone.

Remember that not all credit is good credit. Additional credit cards, even those never used, can work against you. This is because those credit cards are looked upon as being open credit lines—and while they have not been used, they could be used, and potentially used up to the maximum dollar amount allowed by the credit card companies. As a result, their perceived risks lower your credit, or FICO, score.

When looking for the right lender, treat the ordeal as you would the house-hunting process itself. Don't stop looking after one, compare rates, and don't settle.

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