If you want to improve your odds of getting a mortgage, check off these steps on your pre-mortgage check-list!
Gather required documents
When applying for a mortgage, you’ll need to submit a lot of documents. Make sure you know what you need. Most lenders will ask you for a package of materials.
You will be asked for items like pay stubs, tax returns, bank account statements, and documentation to explain any unusual large deposits or withdrawals. Lenders will most likely want to see two years worth of your federal taxes. So, make sure you have your taxes in order too.
Another key for loan approval and determining your interest rate is your credit score. It is important to know what your scores from the three major credit bureaus are before applying for a mortgage. Credit scores are a very important factor in your home buying journey!
Understand the current market
Often, the types of loans available to you depend on the market you are purchasing in and the home you buy. It is important to understand current market conditions. The housing market is always changing, so be ready for these changes.
Since the housing market is hyper-local, find out what is going on in your specific city and neighborhood. Luckily, real estate professionals can help you understand the lending standards of your area. This will keep you from certain properties that you should not be considering.
Pay off outstanding debt
An easy way to increase the mortgage amount you qualify for is to pay off outstanding debt. If you can’t afford to pay off your debts, try consolidating them into a single low interest loan to reduce your monthly payment.
Reducing your debt will help you qualify for more mortgage options. It will also improve your debt-to-income ratio since lenders prefer that no more than 36% of your gross income be committed to revolving loans.
Save money for your down payment
A down payment is the amount you pay upfront when purchasing a home. Your down payment amount can influence the interest rate you’re offered. The bank typically views this as your investment in the property and shows that you are a committed homeowner.
If you don’t have enough money saved for a large down payment, you still have other options! Be sure to ask your loan officer what low down payment options are available to you.
Also, even once you get approved for a loan from a mortgage company, they will monitor your finances through the closing. Your purchases matter until the lender writes the check. So, try to save your money and not make any big purchases that can jeopardize your loan.
Nothing can guarantee that your loan application process will go perfectly smoothly. However, the more you prepare ahead of time, the easier it would be to get the loan you need and the home you want. Follow these easy guidelines, and you’ll be in your dream home before you know it.