How To Get Approved for a Home Mortgage Loan
When applying for a mortgage loan, many people expect it will be similar to renting an apartment or getting a car loan. To help save you the disappointment of not getting approved for a loan after finding your dream house, we’ll go over some bulletproof tips on how to get approved for a home mortgage loan! With a little bit of knowledge and preparation, you can go into the home buying process with confidence!
Start Building Your Savings
If you’re getting ready to apply for a mortgage loan, you can expect to pay money upfront. Applying for a loan without a down payment is likely to get your application rejected. While the payment amount will vary from lender to lender, the average minimum is around 3.5%. However, the more money you can pay, the better! Lenders require insurance for borrowers that put down less than 20%, which increases your monthly payment. Paying 20% or more will allow you to avoid the insurance and keep your mortgage payments as low as possible. However, don’t only save up enough for 20%; you’ll need enough for the other fees and expenses that come along with a mortgage loan.
Reduce Your Debt as Much as Possible
While you don’t need to be completely debt-free, you’ll want to get your debt-to-income ratio as low as possible. It’s one of the most important things that a lender considers. Your monthly debts shouldn’t exceed 36% of your total monthly income, so even credit card debt could cause them to deny your application. If you want to look favorable in the eyes of the financial institution and increase the chances of getting your mortgage loan approved, we recommend lowering your debt and paying off as much of your credit cards as possible. Additionally, lenders re-check your credit before closing, so you want to make sure you don’t take on new debt in between getting approved for your loan and closing the sale.
Monitor Your Credit Score
While you’re working on reducing your debts, it’s also a good idea to keep an eye on your credit score. All too often, homeowners assume they have high credit scores, only to submit an application and find out their score wasn’t where they thought it was. A simple way to avoid this is by checking your credit score and history before beginning the application. Low scores, missed payments, and derogatory credit information is enough to get your application rejected, so this isn’t something you want to ignore. Most institutions have a minimum credit score of 680 and can deny your request if you fall below this.
Try Out Mortgage Number
If you really want to prepare yourself for a mortgage loan, our Mortgage Number Calculator will show you exactly how lenders and financial institutions see you as a borrower. There’s no need to pull out your credit card and there’s no complex processes; simply enter some basic information into our calculator and get your results! We’ve created a number system (similar to a credit score) and color dimension to illustrate your overall strengths and weaknesses clearly. If your results are green, it means you qualify, gray means you’re close, and red means you need some work. If you get a gray or red indicator, don’t be discouraged! Our calculator will show you exactly what you need to work on to get your finances in order and get approved in no time! You’ll want to know this valuable information before getting preapproved, purchasing, or refinancing. Now that you know your strengths and weaknesses in the mortgage environment, it’s time to get pre-approved!
Get Pre-Approved for a Mortgage Loan
It’s a good idea to get pre-approved for a mortgage to know what price range you should be looking at and how much you can bid. During the pre-approval process, you’ll submit financial information such as your W-2s, bank statements, retirement accounts, and more. Keep in mind that the lender may pre-approve you for more than you can afford. This is because they factor in debt such as credit cards, student loans, and rent, but don’t consider your recurring costs like groceries, gas, entertainment, and so on. In this case, you’ll want to consider how much you believe can fit within your budget. The last thing you want is to be tied up in a mortgage that you can’t afford. Don’t lose sight of your budget because you got approved for a higher loan than you expected. We hope our tips on how to get approved for a home mortgage loan helps you out along your application process!