How to Prepare for a Successful Mortgage Application

Baseline Mortgage Requirements

• Downpayment – Minimum downpayment to qualify is 3.0% of the purchase price of the home. These funds most frequently come from checking or savings accounts, and other acceptable sources include:
  
  • Secured borrowed funds – At WyHy we offer a variety of ways to finance your down payment which means you get to keep more money to use as you see fit! Contact us today to discuss options for secured borrowed funds.
    
  • Downpayment assistance programs – FannieMae as well as FHA (HUD) offer several downpayment assistance programs that you may qualify for.
    
  • Gifts from family members – With just a letter and a cashiers check or wire your family member can help you with your downpayment.
    
• Credit Score – While there is some flexibility on what credit score you need to qualify the rule of thumb is a FICO score of 620 or higher. If you are unsure of what your FICO score is you can check the results of your quarterly soft pull on credit through WyHy Personal Banking by going to Loans > FICO® Score. The higher your credit score the lower your interest rate, and here are a few steps to improve your score:
  • Make your payments on time – Payment history is one of the most heavily weighted factors when the credit bureaus calculate your credit score. Consider setting up automatic payments to aid in on-time payments.
    
  • Keep balances low – Having a maxed-out credit card is one of the fastest ways to drop your score, and on the flip side of this, paying down a credit card that is nearing its limit is one of the fastest ways to improve your score. It is recommended to not maintain a balance of more than 30% usage on a credit card.
    
  • Avoid unnecessary credit inquiries – Whether it be applying for a department store credit card, purchasing items through rent-to-own businesses, or applying for a new loan, each time you provide your social security number and authorize a credit inquiry it reduces your score. Additionally, opening many new lines within a short period of time can be viewed as an indication of a downturn in your economic circumstances.
    
• Income – When considering income, and time on job, the main focus for lenders is regarding the Debt-To-Income ratio. DTI is a ratio of all existing monthly payments, plus the new mortgage payment, in comparison to the total gross monthly income of all borrowers on the application. Ideally, no more than 45% of your gross monthly income is going out to consumer debts and the potential new mortgage payment, but this number can be as high as 55% and still be approved for a mortgage application. In addition to considering your DTI ratio, lenders also consider the following factors when reviewing your income:
  
  • Job stability – One year in the same field of employment is the minimum to qualify for a mortgage; however, this does not require employment with the same employer, just the same line of work. Keep in mind, if overtime, differential, per diem pay is to be used to qualify, this requirement increases to two years. For 1099 and self-employed borrowers two years’ time on the job is the rule of thumb.
    
  • Included debts – Payments on auto loans, personal loans, credit cards, etc. as well as any court ordered payments like child support and/or alimony are typically included in Debt-To-Income calculations.