To qualify for a loan, you’ll have to be able to go through the lender’s inquiries confidently. Prepare yourself by having a look at these questions.
Applying for a mortgage is a stressful process, especially when you know that you’ll be asked a lot of questions, and not just about your proof of income. Because you’re about to borrow a lot of money from them, mortgage lenders might grill you in order to be sure that you’ll be able to pay back the loan.
If you’re getting ready to buy a house, here are some of the most common mortgage application questions that you’ll need to be prepared to answer:
“What’s your occupation?”
Mortgage lenders are required to have a look at your income statements to ensure that you are earning enough to make your payments. Some of the proofs of income they will want to see are copies of your checks and your most recent pay stubs. They might also ask how long you’ve been holding your current position to determine your job’s level of security.
“How is your credit history?”
The reason why real estate experts tell you to take care of your credit history when buying a house is to increase your chances of getting approved for a loan. Lenders take a look at your financial history to see if you’ve had any credit problems. They also look at your credit inquiries and ask if you’ve applied for other loans or credit cards that haven’t appeared on your history yet.
“Do you have any assets?”
Your lender needs some assurance that your current money decisions are not centered on your home purchase and that you’re not just counting on property appreciation to financially support you one day. You’ll have to show them proof that you have money put away for other purposes, such as an emergency fund for hard times, as well as a retirement fund.
“Do you have any outstanding debts?”
How well you manage your existing debt will also tell the lender if you can handle one more in the form of a mortgage. A lender would prefer to see a debt-to-income ratio of about 30-40%, which indicates how much of your income will go to paying off the loan. If you have other consumer debt like credit cards and car loans, this percentage can be bigger.
“Are you going through any legal procedures?”
A lender needs to know if you’re currently involved in a lawsuit because of its burden on your finances, as well as the chance that the verdict will go against you. If the lender asks if you’re getting divorced, this is not a personal attack so you don’t have to go into detail about how you and your spouse ended up making this decision. Divorces are also costly and can often lead to bankruptcy, and your lender has to have assurance that you can still afford your mortgage once the legal process is done.
Every borrower is required to answer questions that will tell their lender about their capacity to buy a home and pay off their loan. However, if you feel that the lender’s questions are unacceptable (“Are you about to start a family?”, “Do you have any disabilities?”, etc.), don’t hesitate to approach another lender.
Jillian Cariola, Writer
(cover image by Chris Baker)