Your financial history is a critical factor when you are applying for a loan or a mortgage. Because of this, there are many different considerations you should make before applying. Here are six credit and job history questions to ask when applying for a loan.
I am Self-Employed. How Would a Lender Verify My Employment?
A lender generally would ascertain your employment history by poring over your last two or three federal and state tax returns as well as your company's financial statements-specifically the income statement, balance sheet, and statement of cash flows. The mortgage underwriter verifies not only your financial situation and income prospect, he or she also evaluates how long you have been working for yourself. Normally, two or three years of successful self-employment would satisfy the lender's income and employment criteria.
Does the Number of Jobs I've Held Affect My Loan Approval Chances?
Hopping from one company to another would not negatively affect your mortgage approval chances. A lender generally looks at your income growth and whether you have been able to make all debt payments on time. The creditor also delves into your job history to make sure there has not been major waiting periods in your employment.
I Have a New Job But Haven't Started It Yet. What Do I Put on My Application?
Enter in your mortgage application the salary you expect to receive in your new role, and indicate that you have been in the position for a few days or weeks. The mortgage underwriter would verify that information, so don't worry. Also, don't forget to enter money you made at previous companies.
Will My Credit Score Affect My Loan-Approval Chances?
Yes, your credit score will determine whether you get approved for a mortgage-and if you are approved, specific terms and conditions, such as interest rate and monthly payments, that apply to your mortgage. A credit score, roughly defined, is a number ranging from 300 to 900 that tells a lender where you fall on the creditworthiness spectrum. The higher your score, the more favorably lenders look at your profile. Your credit score is calculated based on various factors, including:
- The amounts you currently owe,
- Your payment history,
- The length of your credit history,
- Types of credit you used-think credit cards, personal loans and mortgages, and
- New credit.
To get more information about your credit score and history, contact each of the top three credit bureaus: TransUnion, Experian and Equifax.
Is My Credit Score Affected after a Creditor Inquiry?
A single inquiry would not affect your credit score too much, but a multitude of inquiries over a short time span could be worrisome. This is because increased reviews of your credit file means you have kicked off a borrowing spree and your use of credit would be increasing in the short term. Just so you know: the credit bureaus only use credit inquiries that are older than 30 days when calculating your credit score.
Will I Have to Pay a Credit Report Fee?
A lender may charge you a minimal fee to access your credit report, but the fee typically is refunded to you if your application is successful.