New year, new home
For clients who might be in the market for a new home next year, now's the perfect time to get prepped. Suggest that they learn as much as they can now about mortgage approvals and how lenders make their decisions, before the holidays are in full swing.
Your local lending specialist can partner together with you to serve your clients, providing them with insight into the factors that influence lender decisions. As your clients deepen their understanding of the process, they may increase their chances of mortgage loan approval.
Here are six tips that could help ease the path to approval.
1. Thinking like a lender
Lenders want to know first and foremost that your clients will be able to repay their loan. To evaluate this, one of the key factors that the loan underwriter considers is a client's debt-to-income ratio, or DTI. (Our Better Money Habits® article can help your clients figure out their DTI, quickly and easily.)
2. Keeping their DTI low
Usually lenders want a DTI lower than 36%, but different lenders have different requirements. Clients who need to lower their DTI can do so in a few ways:
- Prioritize paying off their debts, such as credit cards and student loans
- Increase the amount of their down payment to decrease the total amount they need to borrow
- Look for ways to add new income sources to increase their current income level
3. Reviewing their credit history
Remind clients that lenders will also check their payment history and credit score. With that in mind, clients may want to review their credit report before they begin their home search so they have time to address any issues or errors that come to light.
4. Saving for a down payment
Clients may not realize that if their down payment is less than 20% of the purchase price, they may be required to pay for private mortgage insurance (PMI), which would increase their monthly mortgage payment. In other words: The more your clients can put down at purchase, the better.
Feel free to share our everyday savings tips with clients and potential clients who are looking for ways to accelerate their saving strategy and trim their current spending.
5. Low down payment options
If you have clients who aren't sure they can afford a large down payment, that doesn't mean they have to give up on the dream of homeownership! Clients can search for low down payment options and cost savings programs in their area with the Bank of America Down Payment Center.1 They may also want to check out the Affordable Loan Solution® mortgage, which offers a down payment as low as 3% for qualified buyers.2 Income limits apply.
6. Getting prequalified
For clients who would like to know how much they may be able to borrow, getting prequalified takes just minutes.3 Refer clients to your local lending specialist, who can also answer questions they may have about home financing questions.
"How mortgages are approved," BankofAmerica.com
1Down payment and/or closing cost assistance programs may not be available in your area. Down payment and/or closing cost assistance amount may be due upon sale, refinance, transfer, repayment of the loan, or if the senior mortgage is assumed during the term of the loan. Some programs require repayment with interest and borrowers should become fully informed prior to closing. Not all applicants will qualify. Minimum credit scores may apply. Sales price restrictions and income requirements may apply. Homebuyer education may be required. Owner-occupied properties only. Maximum loan amounts may apply.
2Available for fixed-rate purchase loans with terms of 25 or 30 years and on primary residences only. Certain property types are ineligible. Borrower(s) must not have an individual or joint ownership interest in any other residential property at time of closing. Maximum purchase loan-to-value is 97% and maximum combined purchase loan-to-value is 103%. For loan-to-values >95%, any secondary financing must be from an approved Community Second Program; ask for details. Homebuyer education may be required. Restrictions apply regarding co-borrowers. Maximum income and loan amount limits apply.
3Prequalification is neither preapproval nor a commitment to lend; you must submit additional information for review and approval.