Buying a home is a significant financial investment and it could be potentially stressful because of the long processes involved.
Getting your dream house is often a major hassle in itself — sometimes you’ll find a house you love but it won’t be up for sale, sometimes it’s up for sale but the price is not right, sometimes the price is right but it doesn’t fall in the school district of your preferred school for the kids. However, getting a mortgage shouldn’t be another battle you have to fight in your bid to own a home.
Nevertheless, many people erroneously believe that you must go through a stressful experience in the process of getting a mortgage. They cite the huge paperwork involved and stats on rejection numbers to buttress their pessimistic outlook. However, you can improve your odds of securing a mortgage by preparing in advance before sending in an application.
Prior preparation also makes the lender more willing to work with you; as a result you’ll find the mortgaging process much easier.
With all of that in mind, here are three surefire tips for improving your odds of getting your mortgage application approved:
1. Know your credit score
As strange as it may sound, many potential homeowners don’t take the time to know their credit score before they send it a mortgage application. Many people assume that they are still in good credit standing today because they had an excellent credit score two years ago. However, a couple of oversights on your part, mistakes on the part of your credit card company, or identity theft could do serious damage to your credit score.
Before you send in your mortgage application, order your credit report and credit score in order to review your credit worthiness. It’s important to note that most lenders want a credit score of at least 680. A credit score of 620 could get you a mortgage with FHA mortgage plans but you are not likely to get any mortgage with a lower credit score.
2. Prepare your down payment
In years past, you could easily get a zero-down mortgage in which you’d use “other people’s money” to buy a house. However, the prevailing trend now requires prospective homeowners to demonstrate their seriousness and commitment by making a down payment on the house in order to secure a mortgage. If you’re planning to buy a house in the future, you might want to start saving up money now so that you can have a decent down payment to fast track your mortgage application.
Minimum down payment requirements vary from one lender to another. However, on average, most lenders expect you to drop a down payment of at least 3.5% of the home’s value. It is in your best interest to pay as much as you can in down payment. In fact, you should strive to make a 20% down payment so that you can reduce your mortgage balance significantly.
More so, a 20% down payment often has a material impact on the mortgage rates because it eliminates the need for private mortgage insurance popularly known as PMI. Hence, you’ll pay less in monthly mortgage payments without the PMI.
3.Beware of the employment changes you make
Most conventional personal finance experts and mortgage advisors often fail to impress upon prospective homeowners the importance of staying at their jobs during the process of a mortgage application. As strange as it might sound, your mortgage application might be denied if you lose your job or if you change jobs before the mortgaging and home buying process is completed.
Lenders try to minimize the risk of a default as much as possible and they often consider your employment status and financial solvency before approving or denying your application. Hence, they might be forced to deny your application if you lose your job or quit your job before the application is approved. More so, the lender is not likely to approve your mortgage application if you move to a lower paying job or if you decide to start your own business or work from home in your pajamas.
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I was glad that my job was stable back then when I applied for mortgage because it was asked whether I was gonna change jobs. That helped my application approved.
I like what this article recommends about preparing a down payment. It makes sense that this could be a big part of getting a good mortgage because it could take care of some of it. It could also show that you’re able to save money which would make you look easier to lend to. Thanks for the tips!
My husband and I are going to be buying our first home in the next few months so we will have to keep these tips in mind while we are getting ready to go through the process. Hopefully, it all will go smoothly, thank you for sharing!
What a mortgage lender wants to see is that you have a good, steady job to pay them back with. If you go and quit your job for a new one in the middle of the mortgage process you might scare them off.
Getting a mortgage is kind of scary, since I have never done it before. My wife and I are hoping to get a new home this year, so thanks for this. I will make sure to really start saving, so I can afford a good down payment.
If you’re thinking about buying or refinancing your home, it always pays to shop around for the lowest mortgage loan options. This can save you lots of money over the course of the loan and reduce the stress of paying the high interest for long term.
Now get out there and get your loan!
I’m looking at buying a home, but I don’t have any experience getting approved for a mortgage loan. I thought your suggestion to save for at least a 20% down payment was very interesting. It’s good to know though since I wasn’t sure of exactly how much money I ought to save up as a down payment.
Thanks for the great tips for getting a loan approved. We assume we still have good credit. However, we’ll take your advice and check our score, just to be sure.