Owning a home has always been a dream of a lot of people. However, with the past few years seeing a massive amount of mortgage loans going default, it seems that lenders aren’t as willing to hand out mortgage loans.
However, this isn’t something that you should look dimly upon. They DO still hand out mortgage loans; it’s just that they’ve gotten stricter through the years. If you’re thinking of buying a home, it would be smart to check your chances of loan approved.
Aiming to Get a Mortgage Loan?
There are some ways to ensure that you’ll have your loan approved:
Have a Good Credit Score
This means no outstanding loans or debts. It would be good to check your more recent credit report. A common mistake that we’ve seen is that potential homeowners do not even bother to check their credit score until the day they send in their application for a loan.
You can have a good idea of what your credit rating is by requesting your credit report from a credit bureau. They’re legally obligated to provide you with a report for free at least once a year. Having your credit report a couple of times a year can help you check if there are any errors that you need to contest or if you’ve been a victim of identity theft.
If you do find yourself with a low or poor credit score, it would be in your best interest to get financial consultation on what you can do to rehabilitate your credit rating. It is important to keep in mind that your credit score is one of the primary things that your mortgage loan approval will rely upon.
If you have any financial issues, it’s important that you square those away before you even consider taking out a mortgage loan. Consult with a financial counselor to see what your standing is so you’ll know what to do next.
Have Cash on Standby
This is separate from your down payment for the home. What you need to keep in mind is that the premiums and requirements for a home can change at a drop of a hat. It could be one thing when you were screening lender firms and another when you actually go to approach them. So it’s important to have cash on standby in order to show the lender that you are financially capable and financially savvy.
As for your down payment, it would be smart to aim for at least 20% of the overall price of the home you’re looking at. That way, you’ll afford yourself a lower balance for the entire duration of the loan. Keep in mind that it’s not only the down payment that you will need to pay for. There are other “hidden” costs to buying a house which can include: inspections, appraisals, deed handling, and many other things.
Having cash ready is a great way to start off at the right foot. It sure as heck will impress your potential lender.
Ready All Your Documentation
In order to save your time (and your lender’s time as well), it would be good if you were to determine what all the requirements that you need will be. All it will take is a phone call or browsing the website of the potential lender. Usually, they will list everything there in order to avoid having to spend an hour having to explain to people what they should bring in.
Lenders will want to see suitable documentation of your financial history. This will probably include upwards to two years of your tax returns and several months worth of paychecks. If you and a partner are going to be co-signers, it would important to get all the documents to show that sorted out. You will need to present suitably identification—IDs, birth certificates, social security numbers—the works.
It is also possible that they will want to check in with your employers to get a better hold of your standing. If you’ve had any odd blips in your employment history (like bowing out due to illness or other things) be sure to have suitable documentation to explain that. Lenders are now jitterier regarding clients and their abilities to hold down a steady income. It’s nothing against you personally; they need to protect their bottom line as well.
Let’s Say You Got Your Loan Approved, Now What?
One of the more responsible things to do as a future homeowner is to get pre-approved for a loan before you start looking for a home. That way you’ll have a better idea of what you’ll be able to afford. There’s also the chance that your lender will give you a larger loan amount than what you expected. However, this does not mean that you should aim for a larger home.
What’s important is that you find a place that’s well within your comfortable spending zone. Consider the location and everything around it. Will there be anything that can potentially lower or raise your property value? Those are things that you need to consider carefully.
Don’t Go Crazy with Spending
An easy thing to do when you’ve been approved for a larger amount of money is to use the extra money for things that can put your financial status in jeopardy. Hold off buying anything exorbitant like fancy furniture. Remember that your lender can have access to your statements.
Sudden large purchases (that aren’t your home) will make you seem a risky investment. The lender can end up pulling out before you even finish paying for the home.
Never Miss Your Payments
After all the trouble of getting everything sorted out in order to get approved, why would you want to put that in danger? Missing out on your payments right way is a major red flag that your lender will take quite seriously.
With all this in mind, it’s time to get started with the task of getting that mortgage loan! Best of luck!