De-Mystifying The Loan Approval Process (It is not as tough as you think)

by Alex Stenback on September 28, 2011

Mortgage Applications Are Rising, but…
The Mortgage Bankers Association reports that mortgage purchase applications rose 2.6% pecent last week.

While this is potentially good news for the ailing housing market, these numbers are not as high as they should be when we have record low interest rates and housing prices have been rolled back by a decade or more.

And as a loan officer who spends most of his working hours approving home loans for people, I can tell you why: Fear.

Aspiring homeowners fear that they won’t be approved, or that they won’t meet the new, “tighter” lending standards they’ve read so much about in the media and elsewhere.

My fear is that many potential homeowners may miss out on a great opportunity because they regard the loan approval process as mysterious, difficult, or even arbitrary.

The fact is, credit standards, down payment requirements, and employment criteria are not as strict as many believe,  and you might be surprised at just how easy it is to secure financing.

A Loan Approval is Easy to Get – Just Satisfy the “Three C’s”
There is no mystery to getting your loan approved.  Many of the worst fears – that you must have perfect credit, or 20% down, or 2 years on the same job – are not based in practical fact.

All that you need to do is satisfy three basic requirements, or the three C’s:

- Capacity:  Income should be stable, likely to continue, and adequate for debt obligations.
- Credit: Good (but not perfect) credit is a must. A FICO score of 640 will be lendable in most circumstances.  Over 740 opens up the best available rates.
- Cash: (or equity) Expect to have a modest down payment. 3-5% is typically the minimum, but VA and USDA both allow zero down for qualified buyers.

That’s it.  Satisfy the above, and your pre-approval is all but guaranteed, and you will be house shopping in short order.

Bottom Line:  Don’t let fear of the  unknown keep you from giving a pre-approval a shot.  If you satisfy the three basic requirements, your loan will be approved with flying colors by nearly any lender with whom you choose to apply.


Looking to get pre-approved for financing? 
Take the uncertainty out of the home buying process and drop me a line with a few bullets about your situation and goals. I’d be happy to walk you through the process.

Benefits of a Pre-Approval? It is a fast, free, and easy way to understand your options and assess whether or not buying a home is the right decision.

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