Education Center

Financial Literacy of Lending: Be Ready to Buy a Home

Sean Bunevich

April is designated “financial literacy month” and it’s a good reminder to focus on the five basics that keep consumers of all ages on a good financial path: earn, spend, save and invest, borrow, and protect.

There are also basics when it comes to borrowing money for a home loan. If your personal financial journey has led you to the point of securing a mortgage, congratulations!

We’ll help you apply these four key criteria to your personal situation…. Our number-one goal is to make home ownership a reality for all who desire it.

Let’s dig deeper into some mortgage lending basics that will help you achieve your goals and keep you on that straight and narrow financial literacy path.

At USB, there are four key pieces of lending that we consider when qualifying you for a loan: Income, Property, Assets, and Credit.

  • Income: To determine how much money you can borrow to buy a home, your loan officer will measure your current gross monthly income against your monthly debts. As a general rule, mortgage lenders tell borrowers they can afford a home that is up to two and a half times their gross annual income. All income sources are considered when calculating gross income and must be supported by two years of verifying documents such as pay stubs, W2s, and other tax forms. Income sources include the borrower’s primary-employer income as well as other sources like freelance and commission work, as long as there is a two-year history of it that can be documented on tax returns.
  • Property: When it comes to owning a place to hang your hat, or open your business, it’s not a one-size-fits-all proposition. It’s important to define your needs so that you can match them to a property type. USB provides mortgage loans for a variety of property types. In addition to single-family home mortgage loans, you may want to consider a condominium, multi-family, or townhome. You can also obtain a mortgage on vacant land to build a home. Commercial properties also require a mortgage, and requirements are quite different from residential lending.
  • Assets: Assets are things that you own that have a monetary value. Your income is not an asset. While all assets are considered by a lender, some hold more weight than others in the decision to approve a loan. Those assets include cash (savings and checking), cash equivalents—which are short-term investment securities with maturity periods of 90 days or less, and liquid and physical assets like stocks and bonds or retirement accounts (401k/IRA). Your assets indicate to your lender that if you lose your job, or are in a financial bind, you have a backup plan to stay current on your mortgage payments.
  • Credit: Maintaining a healthy credit score is a critical factor to secure a home loan. While you don’t need perfect credit, demonstrating a history of using credit and building a strong credit score tells the lender that you are a good risk. If they give you a mortgage loan, they want to be sure you will pay it back. For most home loans, a credit score of at least 620 is typically required. Maintaining a high credit score is key to financial success. To improve your credit score you should pay bills on time, pay off credit card balances, dispute credit card errors, and vary the way you use credit, including for rent and utility payments. The higher your credit score, the more likely you are to get the lowest interest rates on a mortgage loan.

At USB, we’ll help you apply our four key pieces of lending criteria to your personal situation. We’ll evaluate your income, property needs, assets, and credit score. Our number one goal is to make home ownership a reality for all who desire it. Our loan officers will work overtime to help determine if you are ready to make this step and put you on the path to become a happy and successful homeowner.

Written by Sean Bunevich

Sean Bunevich is Vice President of Consumer Direct Lending at Union Savings Bank and Guardian Savings Bank. When he’s not working, Sean likes to spend time with his wife and three adorable children.

All home lending products are subject to credit and property approval. Rates, program terms and conditions are subject to change without notice. Other restrictions and limitations apply.
These articles are for educational purposes only and provide general mortgage information. Products, services, processes and lending criteria described in these articles may differe from those available through Union Savings Bank. For more information on available products and services, and to discuss your options, please contact a Union Savings Bank loan officer.