“There are plenty of reasons why you might consider applying for a bank loan. Buying a car, doing some renovations around the house and consolidating debt are just some of the scenarios in which a loan can come in handy. Banks aren’t, however, handing out money to every borrower that comes their way. It pays to do your research before you apply to ensure that you have the best chance possible of getting approved” (Investopedia). When you are looking to buy a piece of property to make into your dream home, you will need to get approve for a loan first. Here are some tips to help you have the best possible chance of getting approved for that mortgage loan:
Know Your Credit Score
Your credit score is more than just a set of three random numbers. It is a quick snapshot of how you have done in the past with debt management, loan payments, money managements, and overall spending habits. The higher your score, the more favorably a lender will look at you. Lower scores usually indicates issues such as unpaid debts, default loans, collections, or bankruptcies- all which are major red flags to any lender considering loaning you money.
Stay at Your Job
Even if you have the chance to move into a new job, it might not be wise to do so while you are trying to get approved for a loan. Most lenders will want to see at least 2 years of solid employment with a steady income. Even moving int a job that pays more can be risky because there is no guarantee it will work for you and last. Moving to a new position within the same business is often not seen as a big risk if you have a track record with that company already well established.
Pay Down Debt and Avoid New Debt
One of the biggest killers of mortgage loan approvals is the debt to income ratio. Even of you make $3,000 a month, if more than 60% of it is going to debt payments, this may be seen as a risk factor for the lender. You want to pay down as much of your debt as possible and avoid opening new lines of credit and making huge purchases while applying. If you an expensive purchase for something like car repairs, talk to lender about it so they understand it is not a frivolous purchase.
Get Pre-Approved for a Mortgage
Another way to boost your chances of being approved for a loan is to meet with a lender ahead of time and ask about getting pre-approved. This is different than a pre-qualification, which basically just says you could be approved for a loan. A pre-approval confirms you will get the loan and can make things much easier and less of a hassle when the time finally comes to close on the home of your dreams. Most lenders prefer to work in this manner, especially with first time home buyers.
Contact Us For Help With Mortgage Loan Questions
There are several different types of mortgage programs for you to choose from. Finding the right loan type really depends on your situation. Conventional mortgages are good for buyers with credit scores of at least 620, with decent income, and a large down payment. Home buyers with poor credit, low down payments, and low income could still qualify for Government home loan programs. “Just because one lender denies your home loan, doesn’t mean you should give up. You should apply with another lender. Each lender has different rules and guidelines for mortgages. If one lender denies you, another lender may be able to help get you approved. If you have low income or a low credit score, it may be a good idea to get someone to co-sign on the mortgage loan for you. A non-occupying co-signer or co-borrwer can be used to help a borrower get approved for a home loan” (TheLendersNetwork).