Theres several criteria a lender will use before deciding to lend to a borrower: especially, a borrower with limited credit or credit less than perfect.
These items will include the borrowers:
FICO Score and Credit History
A lender will evaluate your credit history to establish whether or not you are a high risk borrower. If you credit report states any derogatory accounts, it may be required by your lender for those items to be resolved before a loan can be approved.
Having a low FICO Score or poor credit may result in higher interest rates and less than pleasing loan program options, such as Subprime loans and loans that may require 10-30% down payment.
Employment History and Current Position
Most lenders prefer to lend to borrowers whom have a steady employment history. Also, lenders prefer a borrower who has been on his or her current position for two years or more.
This prospect gives the lender a view of your financial situation and employment reputation. A lender will be reluctant to approve a loan for an individual who may have a reputation of changing careers or poor work history.
Current Debt
Though credit history and employment is essential to the approval of your loan, current debt may be just as vital. Lenders will view your current debt, such as, loans, credit cards, car note, child support orders, tax liens, etc., and compare it to your current income.
Most lenders require that your debt not exceed 40% of your monthly income. Not only will current debts lower the value of your loan, but may result in denial of your loan.
Depending on your situation, you may find it difficult to meet all of the required criterias that your lender sets forth; however, some factors may out weigh others.
For example: If you are employed and have worked the same position for 10 years, have substantial credit, but your current debt is 53% of your income- In this case, you may still qualify for a zero down loan, with a descent percentage rate; however, your lending amount may be less than you are requesting.
The fact of the matter is that every borrower is different. Criterias, Regulations and Rules will be different according to lending companies.
As a borrower it will be your responsibility to search and observe lending companies. For the best scenarios chose a lending company that is compatible with your needs.
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