What Lenders Look for

Generally speaking, most lenders are looking for borrowers with excellent credit, known as prime borrowers. That’s not to say that lenders don’t also make what are known as sub-prime loans, but unless your credit rating is in good shape you are likely to have a harder time getting a loan, and the loan you do get is likely to be more expensive.

Borrowers with excellent credit scores are likely to qualify for the loan rates that are advertised on Television. The best interest rates are reserved for the people with the best credit scores. Also a higher credit score may allow you to buy a home with a smaller down payment or fewer points.

If there is a past problem with your credit history that has been corrected it will often help to include a written explanation of the past problem. Lenders understand such things as an illness or a temporary lay-off or some other transient problem.

Job stability is important to a lender. Lenders do not like to see that you have changed jobs frequently, especially if you have changed professions. Lenders like stability. They prefer to see that you have been on the same job at least two years, or that you have at least performed the same type of work for the past two years.

These factors are not as important when applying for a second mortgage home loan, although they can make a difference when applying for a 125 percent second mortgage.

Before applying for any loan it is important to make sure that you are up-to-date with all of your outstanding debts. If possible, pay off and cancel credit cards; lenders prefer to see that you have only one or two major credit cards and not a whole wallet full of them.

In general, qualifying for the best rate on a home loan involves common sense. Put yourself in the place of the lender and imagine the things that would be important to you if someone asked you for a loan of several thousands of dollars. Then make sure that you have covered as many points as possible.