What is an underwriter looking for? Karen Johnson of Waterstone Mortgage offers some answers.
Today I’m joined by Karen Johnson of Waterstone Mortgage, who has some excellent tips to help buyers prepare their finances for a big purchase in this new year. Following Karen’s advice can help you navigate a market of low inventory and frequent multiple-offer situations.
First, it’s helpful to ask yourself, “What is an underwriter looking for?” Basically, they’ll want to see a credit history that shows you’re able to make payments on time. They’ll also be looking at your income sources to determine whether you’re even able to make the expected payments. Lastly, they want to see that you have enough funds to cover a down payment and closing costs.
Make sure you don’t add any new monthly expenses right before submitting your files to an underwriter for review. It’s always acceptable to decrease expenses, but adding more or extending credit when you’re preparing to buy a home is not advisable.
The lead up to a home purchase is also not the time to switch careers; lenders will need to see pay stubs and tax returns to be assured you have stable income.
The easiest way to prepare for review is to understand that lenders will need to see at least two months’ worth of bank statements. Know that what those statements show in regard to your source of income and your creditworthiness will be taken into account by lenders.
Remember: Your ability to pay will be determined by a specific ratio. The cost of the home will be weighed against your existing monthly obligations, and that resulting ratio can’t exceed a certain percentage (typically around 40%, but sometimes as high as 50%).
If you have any further financing questions for Karen, or real estate questions for me, feel free to give me a call, send me an email or leave a comment with your information. As always, I’m happy to assist any way I can.