Mortgage Approval How Can You Improve Your Chances

Real Estate Agent with Global

Even more than a decade after the global crisis triggered by the subprime mortgage scandal, the effects are still being felt. To protect themselves, mortgage lenders now carry out a more rigorous application procedure. It’s true that being approved for a mortgage is more difficult. However, that doesn’t necessarily mean that it’s impossible. There are ways to boost your chances of being accepted.


Our step-by-step guide is particularly useful for first-time buyers negotiating the financial mortgage jungle for the first time. It will take time, however, and it isn’t something that can be done overnight so your preparations should start at least 6-12 months beforehand.


Become familiar with mortgage terminology


Before you even make an application for a mortgage, you should familiarize yourself with the whole process and all the terminology. You should know all about interest rates (different types, how they are calculated, etc.); the different types of mortgage; any programs you might be eligible for; the cost of real estate in your area; how much you can afford to pay and the predictions for the future (both for loans in general and the real estate market).


Without this knowledge, you won’t be able to judge objectively which lender/loan is the best for your circumstances.


Start saving for a down payment


The larger your mortgage down payment, the greater your chances of being accepted by a lender. This is because your greater equity in the property makes you less of a risk for the lender.


Another benefit of a larger down payment is that you’ll be offered the best deals with lower interest rates.


Unless you’re eligible for an FHA loan or other program, you should have at least 10% of the purchase price put by.


As part of your economy drive to save for a down payment on a house, you should try to reduce your expenditure on non-essentials. The Huffington Post is full of ideas about how to cut down on your spending and draw up a budget.


Get your financial affairs in order


Your first step – and it’s something that you should get into the habit of doing regularly anyway – is to check your credit history report for any errors or anything recorded as a non-payment. It could be due to an oversight on your part. For example, an account which you thought had been closed. Whatever the reason, you should rectify matters well before you apply for a mortgage.


If you have a poor credit score and a past history of unwise financial decision-making, this will be a deal breaker for a potential lender. Most lenders will be looking for a score of around 620+ for a conventional mortgage while 740+ will give you access to the best rates.


There are many ways to boost your credit score. One is by making sure that you keep up-to-date with all your future payments. You should set up auto payments via your bank account if you have trouble remembering payment due dates.


Another way to increase your credit score is to reduce your pre-existing debts. Although student and/or auto loans aren’t so important, large outstanding balances on your credit cards is a different matter. Avoid opening new lines of credit especially as the time approaches for you to apply for a mortgage. Proof that you utilize 30% or less of your available credit shows that you can afford mortgage payments and will boost your chances of being accepted.


Looking for your dream home


Before you contact a real estate professional, you must have an idea of how much you can afford in terms of mortgage payments. You’re more likely to be turned down for a mortgage if you have unrealistic expectations of how much you can afford to borrow.


To determine your mortgage budget, your total costs for housing (including fees, taxes, etc.) should be no more than a third of your pre-tax income although some financial experts recommend a more conservative quarter of your gross earnings. You should also allow some leeway when estimating this figure. It’s no good going up to your maximum borrowing limit since the lender will apply its own underwriting criteria. If the figures suggest that your monthly repayments will be a struggle for you, you’re more likely to be turned down.


In your search for a home, the right real estate professional can be invaluable. It should be someone with a solid reputation, in-depth knowledge of the local housing market and be willing to guide you with their years of experience. Although you may have an idea of what your dream home should be like, you may have to compromise when you start looking.


Preparing the mortgage paperwork


Instead of applying for a mortgage straightaway, first-time buyers especially may wish to go through pre-qualification. Although this isn’t a binding agreement, it will at least give you an indication of whether you stand a chance of being accepted. If there are any problems, this will give you the opportunity to sort them out before your official mortgage application.


As the time approaches for you to make your application, you should make sure that you have all the necessary paperwork. This includes your pay stubs for the previous few months; W-2 forms for the past few years; proof of previous rent/mortgage payments for the past year and a list of all your debts/assets.


Welcome to your new home!


Once you’re settled into your new home, you can start to put your own personal ‘stamp’ on the place by redecorating and making other changes. It’s an exciting time, but it’s all too easy to get carried away and overspend. Don’t forget that your mortgage must be paid every month and that you must keep an emergency fund for any unexpected home maintenance.


If something goes wrong which you haven’t budgeted for, a direct lender can give you a much-needed injection of cash. Applynow for bad credit payday loans with a simple click of the button.


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