How do I know I can qualify for an "A" type loan
Please note: We are not a bank and do not give out loans. Each bank has its own set of rules to decide whether or not to give a person a loan. The criteria given below is meant to be used as a guideline only.
An "A" type loan means a loan for a person with excellent credit, good stability, and sufficient documentable income to make the payments comfortably.
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"A" Credit
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This means - You have not been late on a mortgage or rent payment in the last two years.
- You have not been late on a car payment in the last two years.
- You have not been more than 30 days late on a credit card payment more than twice in the last two years.
- You have had no collections (other than a small medical collection) or any judgments in the last two years.
- Your credit score is good to excellent, perhaps 680 or better.
- An A Paper borrower normally must have at least two months mortgage payments in "liquid reserves". This can be in a checking, savings, investment, or even retirement accounts at any financial institution.
See more details on deciding if you have "A" credit. |
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Sufficient Income
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This means - Your total mortgage payments per month are equal to 29% or less of your gross monthly income (your pay before taxes are taken out).
- Your total payments per month (not including insurance, utilities, food) are equal to or less than 36-41% of your gross monthly income.
- You must be able to prove your income. Examples: tax returns, bank statements, pay stubs.
- In order to count your full income, you must have been employed in the same line for work for the last two years. See our mortgage pre-qualifying calculators to see what you can afford for a payment.
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Stability
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Although credit and income are the biggest two deciding factors on whether or not to give someone a loan, stability plays a part. Good stability means: -
You have been in the same line of work and/or job for 2 or more years.
- You have lived in the same house or apartment for more than 2 years.
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Down Payment
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You cannot buy a house without making a down payment. Typically you need to have saved up an amount equal to 3.5% of the price of the home (at the minimum-- and this is for an FHA loan) to qualify. Some loan programs even allow the down payment and/or closing costs to be paid for through a monetary gift from a relative, such as the FHA program.
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The decision whether or not to give you a loan is not dependent on any one of the above factors alone, but on all three. For instance, if you have excellent credit, but no verifiable income, no one will give you an "A" type loan on a new home (and perhaps no loan period, in today's market). You may still be able to get a loan with less than "A" credit, but the application process will be harder and the interest rate (and points) will probably be higher. More at Brokers vs. Bankers.
Do you have a question you feel we haven't answered?
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