Before you do a thorough homes search, make sure that you will get approved for a mortgage loan first. One of the common mistakes by first-time homebuyers is to jump into homeownership once they hear about dropping home prices and interest rates. If you don't want to end up feeling disappointed about being denied by a lender for a mortgage loan, you need to educate yourself.
You need to understand what makes lenders decide whether to approve or deny a loan application. More importantly, you must know what to do to get approved for one. Here's what you should do:
Check Your Credit Score
It only takes a few minutes to request for your credit score. You should not assume that your credit scores are high enough to make you qualified for a loan. You need an actual credit report so you can verify your credit standing.
Take note that credit activity and credit scores play an important role in loan application approvals. The other factors that can prevent you from being approved for a loan are frequent lateness in payment, multiple missed payments, and other derogatory credit information.
Be Ready with Your Cash
Going to a lender without any significant amount of cash is another easy way to get rejected for your loan application. Mortgage lenders are now very careful, and so a down payment is now a requirement for loans.
It's vital that you stick with your employer throughout the process of your loan application and property sale. Take note that changes to your income or employment status can have a huge effect on the mortgage process. This is because lenders approve loan applications based on the information provided by borrowers. Thus, when you quit your job in the middle of your mortgage application and you decide to get a lower-paying job, lenders will have to take a look at your finances again and decide if you are still qualified for the loan.
Avoid Taking New Debt and Pay Down Existing Debt
The lower debt you owe your creditors, the better. The approval of your mortgage application also depends on how much debt you have at the time of application. Your debt-to-income ratio will be evaluated by lenders, so you need to make sure you have higher income compared to your debt.
It's also not a good idea to take on new debt during the process of your mortgage. Before closing the deal, your lender will re-check your credit, and if it shows that you have additional debts, your loan approval will be at great risk.
You don't have to go through all the preparations for your mortgage loan application alone. There are realty agencies that are willing to help you with the entire process. Baker Realty Group, in particular, has experts in mortgage loans who can help you get approved for a house loan.