What in the world could be better than good credit? Lets look at it the way a lender would, and it will become a little more obvious. Lenders wish to grant loans and even more than that, they wish to be paid back and hopefully on time. Let’s look at my old saying (“Just because you want doesn’t mean you can”) in a different way. Good credit generally dictates a strong desire to do it the right way. However, if you simply don’t have the where with all, you can’t do it. In other words, you need sufficient reserves to meet any crisis that can occur and still continue with you financial life.
This brings us to the number one factor in getting a home loan which leads the other three factors in importance by an overwhelming margin. Lenders are a skeptical breed who believe every thing you tell them but only to a point. You make good money, your credit is good, and you have a nice amount of cash reserves, but as far as they are concerned, lenders consider that things can and do happen to all of us. When things do happen, everything goes out the window, so to speak, and no matter how well prepared you are on paper, lenders consider the impact a potential calamity can have on your ability to repay the loan. So in summation, they are looking for an ace in the hole that will allow them to sleep better at night, and that ace is Equity in Your Property.
If you want a loan that will leave 35% equity left in the property after the loan funds, the lenders are as happy as they could ever be. Many lenders will reduce the rate by 1/8 of a percent just because you have the equity that will assure them that they are covered should something happen and you default on the loan. Your equity than becomes the proverbial cake with the other three factors listed as the icing.
When you understand how the mortgage industry looks at their customers, it makes it easier for you to prepare to get the best possible loan you can get. You also can be in a position to get through any of the smooth talking that might be thrown at you by some in the industry. Just tell them you understand how lenders thinks and that you not only know the four majors factors needed to qualify for the loan, but you also know the order of importance.
Now if you could help me understand how people drive in carpool lanes, I would really be most appreciative. I truly believe that those who drive with enough company to qualify for the privilege see it as a reward for good behavior. They also feel that it gives them freedom to do any or all the following: carry on a long conversation on their cell phone, put on makeup, reduce the speed limit for those in the lane or partake in a picnic lunch with their passengers. The result is a race to the exit to go around them and get back into the lane before the double lines re-appear only to the face problem all over again.
Let me know if you have an answer to that one…