Qualifying for a mortgage is fairly a transparent process and should not be a mystery to borrowers. As an applicant, you should be thinking about every aspect of your life that may prevent you from getting a mortgage loan. That statement is accurate in that prior to lending you money, mortgage lenders review many factors prior to offering an approval.
This post explores some of the myths of mortgage lending and discusses what really counts when it comes to mortgage applications.
Race And Color
If you’re not a ‘new’ mortgage recipient, you must have seen that the standard loan application asks for your race or nation of origin. This question is part of the lending process because the Home Mortgage Disclosure Act (HMDA) requires bank to gather this information, but it’s not mandatory for you to answer.
If you don’t give the answer yourself, your lender must complete the form, and if they fill out this part of your application, then they must to report where your ethnicity was established.
So why this question is a part of the process? Race has nothing to do with it. The Federal Financial Institutions Examination Council requires this data to detect and prevent discrimination. Lenders also use this to audit their files with respect to avoid bias.
Religion And National Origin
It is illegal for banks to ask about religion. However, they must ask for your immigration status and citizenship. If you are a foreign national, you’re allowed to purchase property mortgages, even FHA loans.
You must have an EAD issued by the United States Citizenship and Immigration Services (USCIS). If the Employment Authorization Document will expire within a year and has never been renewed in previous years, the lender will ask you for additional details.
Age And DOB
Lenders always ask for your date or birth, because it is considered as a valuable input when pulling your credit report For example, there may be ten Ben Adams in your area, but they’re very unlikely to have the same date of births. That way the lender can determine that they have the correct individual.
Minors are an exception. The minimum age to enter into a contract ranges between 18 to 21 years in most states.
The Federal Trade Commission (FTC) allows banks during the underwriting process, to ask age-related questions. For example, FTC says “A creditor could use your age to determine if your income might drop because you’re about to retire.”
Gender And Marital Status
It is illegal for lenders to discriminate borrowers by gender.
Marital status is a bit tricky. Banks can’t ask if you’re divorced or widowed, though they can inquire whether you’re married, single, or separated. Your marital status matters a lot and can affect the way you take the property title.
Being married (or not) especially matters in a “community property” state New Mexico, Louisiana, California, Texas, Arizona, Idaho, Wisconsin, Nevada or Washington.
In Alaska and the above states, debts taken on during the marriage period obligate both men and women. One cannot make a property purchase without the permission of his or her spouse.
In community property states, when purchasing FHA a government-backed loan, qualifying for a mortgage involves checking the credit of both spouses. Lenders are required to do this even if one spouse applies for the mortgage loan.
You aren’t required to disclose that you receive child support or spousal income. However, you have to prove that you receive support payments reliably and that the payments will continue for at least 3 years.
Either you pay or receive support income from your former spouse and lenders are required to have a copy of divorce decree to verify the payment terms. You must disclose the support you’re liable to pay as a monthly debt.
The FHA outlaws “familial status” discrimination. Lenders can’t ask you about family planning and that you’re pregnant or not, even if you are. However, mortgage lenders can ask you about child related expenses.
Also, HomeReady or USDA set income limits to determine your eligibility for the loan.
Lenders cannot discriminate people on the ground of physical or mental disabilities and those who receive SSDI.
You can count Social Security Disability Income (SSDI) to qualify for a mortgage loan as long you will be receiving it for at least three years. However, if you don’t need social security payment to be eligible for the loan, you need not to disclose it.
There is a whole list of other factors that also do not need to be included in the loan application but may affect your eligibility. Just because mortgage lenders don’t ask specifically for these things doesn’t mean an applicant shouldn’t consider them.
Health – According to the Journal of American Medicine survey 62% of bankruptcies are due to health issues.
Your health insurance.
Utility bills: if you buy an energy-efficient home, government-backed FHA programs do allow you to borrow money.
How much you spend on commuting. Americans usually spend 15% of their income on commuting.
Do You Know?
Qualifying for a mortgage is much easier now than it was four years ago. The following programs help you to stay on the housing market with low down payments and flexible qualifying criteria.
HomeReady from Fannie Mae – not more than 3% down payment
Home Possible from Freddie Mac – the same 3% down payment
Good Neighbor Next Door — offers HUD-owned one-unit homes for single-families, at a 50% discount.
Get Today’s Mortgage Rates
To get you mortgage quote, call and speak to a counselor at United Financial Counselors. They will guide you through each step of your loan approval process and will educate you about the current mortgage rates so that you can obtain the best quote for you.