What Is Needed To Pre-Qualify For A Bank Loan

When evaluating a potential customer in real estate several key items are taken into consideration. They include the borrower’s debt to income level, employment history, credit score, and their assets. The lender will call for a credit report from the potential client to verify past debts, credit history, number of inquiries, and types of credit help by the buyer.

Credit reports must come from one of the major credit reporting agencies. The top three are Experian, Equifax, and TransUnion. These companies research clients credit and turn their findings into easy to understand reports. They are able to find peoples credit because they are allowed access to the database that holds most peoples information. They also search public records in order to search any judgments that may have been filed against the buyers such as bankruptcies and liens.

Credit scoring is an objective, statistical method that lenders use to determine if a client is at high or low risk for the loan amount involved in the purchase. The score rate the likelihood that the buyer will be able to pay back the loan. Establishing a good track record is very important. Raising your credit score is done by paying bills on time, while being late, or missing payments will affect your score negatively.

Current debt level, length of credit history, payment behavior, and past delinquencies are all considered when evaluating a credit score.

Score come in ranges of 350 to 850. The lower the score the higher the risk that person is to paying back the loan. FICO are the most widely used credit, FICO scores run from 40 to 620 for people who are late on paying their bills and 700 to 800 for those who are paying constantly on time.

IF you are ever denied credit, employment, or housing, you may, under the Fair Credit Reporting Act, receive a free copy of your credit report by contacting the reporting credit agencies directly.

A client will also be asked to provide a proof of funds letter of POF. This could be as simple as a current bank statement, or even a letter from the bank saying that the buyer has enough in their account to cover the down payment. This is used to assure the lender that you will be able to come up with your portion down on the loan.

Debt to income level is the amount of debt a person is holding in comparison to their income. This income can be taken into consideration as a family or as an individual. This ties directly into your employment history. Most lenders require two years at your current job in order to be considered for a loan.

Finally if the buyer has any assets that produce extra income this can be included to get a full financial picture of the buyer and to determine if they are a well qualified fit for the purchase.