Getting the right applicant approved for a Kansas City home loan is a lengthy, detailed process. As a lender, you will need to review their mortgage application carefully, along with a myriad of other documents, in order to determine if they are low-risk and able to repay the loan.

Here are the factors you need consider when evaluating applicants for a Kansas City home loan:

What Is Their Credit Score?

An applicant’s good credit score can show you that they are financially responsible and can qualify for a good mortgage with lower rates. If their score is low, encourage them to build up their credit.

While a good credit score is a good indication that an applicant can pay off their loan, remember that new rules regarding liens and civil judgments on credit reports can artificially inflate their credit scores, putting them at higher risk of defaulting. So remember to check with public records to determine if they have any liens or judgments against them that could affect their ability to qualify for and pay off a Kansas City home loan.

What Is Their Income?

Check the applicant’s different forms of income, including their gross income, disposable income, and discretionary income to determine your loan eligibility. These will help you determine if the applicant can afford a home loan and budget for monthly payments.

If applicants are self-employed or are making large purchases before or after they apply, evaluate with extra scrutiny, as their income may be unstable and these purchases may make them unable to make their monthly payments.

Do They Have Any Assets & Collateral?

An applicant must have sufficient assets and collateral they can use in the event that they fall behind on their payments. For example, liquid assets like stocks and a savings account can be used to secure extra funds. If they don’t have these assets, they can become liquid asset poor, which runs the risk of them falling into debt and foreclosing on their home.

Since the property that an applicant purchases will often be used as collateral if they end up foreclosing, the value of the property must match the applied-for loan. If the appraisal of the property does not match an applicant’s loan, they could fall into a deficiency.

Are They A Boomerang Buyer?

If an applicant has foreclosed on a home and are looking to buy again, they are known as a “boomerang buyer.” Many of these buyers can afford to pay their loan, but you will still need to determine who backed their loans on their original home and if they have repaired their credit history. In doing so, you can determine if they are eligible to for another loan and have the ability and willingness to pay it off.

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The above information is for educational purposes only. All information, loan programs and interest rates are subject to change without notice. All loans subject to underwriter approval. Terms and conditions apply. Always consult an accountant or tax advisor for full eligibility requirements on tax deduction.