This means that a borrower must prove to the lender that they are able to sustain the mortgage payments over the long term. To accomplish this, lenders will typically require financial statements as part of the loan application process and may even ask for additional documentation or updated statements throughout the life of the loan.
To prove a reasonable expectation of continuance, borrowers must first provide their current financial information to the lender. This includes any income sources such as wages, investments, retirement savings, and other revenue streams. It is important to have all documents in order, including tax returns, pay stubs, investment portfolios, and other evidence of income. Furthermore, lenders may request that borrowers provide documentation of any debt payments they are making, such as car loans, credit card balances, or student loans.
The next step in proving a reasonable expectation of financial continuance is to document all anticipated long-term expenses. This includes all expected living costs, such as food, housing, transportation, and entertainment, as well as any expected major expenses like medical bills, vacations, and repairs. Lenders typically view these expenses as necessary living costs. It is important to accurately document estimated and recurring expenses, as this can help to determine if the borrower has the ability to make consistent payments on the mortgage.
In addition, many lenders also consider non-financial factors when assessing a borrower’s outlook for future financial stability. These non-financial factors can include a borrower’s occupation and any current or anticipated job changes, their educational background and future plans, the stability of their marital status, whether or not they have dependents, and the length of the credit history. All of these variables are used to assess the likelihood that the borrower will remain financially stable over the course of the loan.
Overall, to gain approval for a mortgage, potential borrowers must provide evidence that they are able to afford the loan and have an expectation of continued financial stability. It is important to be prepared to provide accurate and up-to-date documents that accurately describe one’s current financial situation and anticipated future expenses. Furthermore, lenders may also assess non-financial factors to ensure that borrowers have the capacity to make reliable mortgage payments for the duration of the loan. By being prepared to provide both financial and non-financial information, potential borrowers can increase their chances of being approved for a mortgage with a reasonable expectation of financial continuance.
This article was contributed on Nov 01, 2023
