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Lenders look at certain items before approving a loan.
1. Your current financial situation (Click Here to use our budgeting tools)
2. Your Credit Standing or History
Lenders need to assess the risk of lending money to you. They do this by looking at your credit history. These can include histories on:
Many lenders use a type of credit scoring based on FICO (Fair,Isaac, & Company) guidelines. This scoring method, although beginning in the early 1980's, has really grown in popularity since 1994. Your credit score is based on the following factors:
Scores may be between 300 and 900 with 700 being the dividing line. A score of 700 or better means that you are most likely a good credit risk. This does not mean that you are not a good credit risk if your credit score is below 700.
What can I do to improve my score or standing?
3. The Collateral
Is the home you want to buy worth the money you are asking for? When you purchase a home, the home itself is used as collateral. It is important that the lender feel secure about the purchase. The value of your home is determined by an appraisal being performed. A licensed appraiser estimates the value of a home by comparing the home to similar homes that have sold recently in your area.