What affects your mortgage application?

Have you taken an exciting step towards homeownership by filling out an application for a home loan? When your mortgage application and documentation go to underwriting, the underwriter will evaluate your ability to repay the loan. The mortgage underwriting process measures how risky your mortgage is to the lender. Because underwriters assess job stability, employment and credit history, any sudden changes in these areas can affect your loan approval. During this process, it’s helpful to understand what can affect your mortgage application, so you’re in the best position possible to get a home loan.

With your credit score and your debt-to-income ratio, job stability is a crucial indicator of your financial health and how much home you can afford. If you’re wondering if you can get a mortgage with a new job, ask yourself these three questions.

• Did you take a pay cut when you changed jobs?
• Are there big gaps in your employment history?
• Did you start an entirely new career or move to a new industry?

All three of these situations can raise a red flag and affect your mortgage approval. The key is to prove that you have a steady income. Be prepared to provide copies of recent pay stubs, documentation of work history and tax returns. If your documentation shows that your new job is in the same industry and pays the same or more, that indicates a strong employment history and the ability to make monthly loan payments.

Whether or not changing jobs affects getting a mortgage may depend on the type of loan. In general, mortgage employment rules require you to provide two years of employment history to qualify or two years of relevant schooling or military service for VA loans.

For conventional loans and FHA loans, you must be in your current job six months if you have gaps in employment. There is no minimum time requirement for employment length in your current position when applying for a USDA loan.

Sometimes changing jobs is unavoidable, such as when you move to a new city or finish school and start your career. Whatever your situation, our loan officers can help you qualify for the loan that’s right for you. If possible, connect with a loan officer before filling out a mortgage application to discuss your options and what you need to do to qualify.

We’ll use your credit report and credit score to calculate your interest rate. The higher your score, the more likely you are to be approved. If you miss a credit card payment, your credit score may drop. Missed payments of any kind can hurt your credit score. It’s best to pay all of your bills on time.

Maxed out credit cards can hurt your credit score as well. The smaller the percentage of credit you’re using, the better.

Just like missed credit card payments, any late bill payments can lower your credit score and affect your chances of getting a mortgage.

An overdraft is when you make a larger purchase than you have money in your account to cover, and the bank winds up paying the remainder for you. As you prepare for homeownership, resist the temptation to start making big purchases for your new home. Not only can large purchases increase your debt-to-income ratio, but you also risk overdraft, which can affect mortgage approval. Have you recently opened several new accounts? This is a red flag of risk to lenders because it can indicate you’re on a spending spree opening multiple lines of credit.

No. Mortgage discrimination is against the law. The Fair Housing Act (FHA) protects families with children, including people who are pregnant, in the process of adopting a child, or foster parents. Guild will evaluate your credit history, assets, employment, income, and current debts like any home loan applicant.

Do you have questions about what can affect your mortgage approval? Contact a loan officer today.