Lesson 2: Lender Criteria

• To determine if borrower is good risk, lender must look at - buyer's income
• To determine income - borrower myst provide last 2 years of federal income tax return paperwork. Self employed individuals may have difficulty proving income and have to repay requirements
• Once income is known, lender's underwriter calculates 2 debt ratios - monthly expenses to income (principle, interest, taxes, insurances, and other loans), and total payment obligation to income (revolving credit card debt, auto loans, student loans)
• Lenders may request documentations including: verification of employment, bank statements, rental/mortgage history, loan balances, w-2 statements, and pay stubs
• Borrowers with credit score between 580 and 620 may qualify for a low-down payment FHA loan/conventional loan w/ large down payment. Scores below 580 will likely not be approved. 
• Loan to value ratio - ratio of loan amount to value of property being purchased
• Lenders know the property's investment quality by - looking at appraisal and loan to value ratio. Lenders base decision on how property appraises