“You mean I need a job to get a mortgage?”
“Yes, in this caseÂ you do.”
“I’ve paid all my bills on time all these years and now you’re telling me I need a job to buy my first home?”
This was a recent conversation we hadÂ with a potential borrower. Unfortunately in this market and in this day most borrowers will need to have a stable income source to qualify for a mortgage. You can’t just state your income anymore and obtain 100% financing, regardless of your credit score. Below is a diagramÂ we’ve used for many years to explain how a proper lending decision is made. My wife Aimee calls it the “Four Corners of Home Financing” and itÂ shows you the four things we lenders lookÂ at when we make a loan decision.
The four items need to be in a healthy balance to obtain the right kind of financing. Here is what the text says if you’re having a hard time reading:
The source of your income and your employment history
An outline of your credit history and resulting score (scores range from 350 to 850)
Your savings, any investments and retirement uses as a source for down payment, closing costs and reserves.
The type of home (condo, townhouse) and for the purpose (primary residence, second home or investment)
Hat/Tip: Aimee Ghimire