Mortgage Approval: 4 Factors Lenders Consider
Buying a home is one of the most exciting, intimidating and rewarding milestones many of us will achieve in our lifetime. If you’ve spent countless hours daydreaming about the perfect house you’ll want to prove you’re an attractive candidate so you can get pre-approved for a mortgage loan.
Once approved, you’ll be able to pick the loan that’s right for you, establish how much money you’re able to borrow, and estimate what you can expect for a monthly payment. You’ll also be seen as a serious buyer in the eyes of sellers and real estate agents.
If you’re ready to start shopping for a new home, it’s time to get serious about applying for a mortgage loan. Here are four factors your lender will consider during the mortgage approval process, and some tips on how you can increase your chances of getting approved.
Funds
Do you have sufficient funds for your down payment and closing costs? Your loan officer will verify your funds by requesting an account balance from your bank or credit union, as well as copies of your most recent banking statements.
Looking for ways to give your bank account a nice boost? Saving up to buy a home may be easier than you think. We’ve put together a post uncovering 15 common places your down payment could be hiding. You could also ask a family member for a gift of money to use toward your down payment or closing costs. If you’re planning on going that route, read up on how you need to properly document those funds.
The great news is you don’t necessarily need a large sum of cash to buy a house. There are a number of low down payment loan options that allow buyers to purchase a home for as little as 3% (and in some cases 0%) down!
Income
Can you repay the debt? Your lender will ask for employment information, like your occupation, how long you’ve worked for your current employer, and how much you currently earn. You can verify your income by presenting your two most recent W-2 statements and one month of your most recent pay stubs. Lenders will also make sure your debt-to-income (DTI) ratio is acceptable. If your DTI ratio is above a certain threshold, it could impact your chances of getting approved for a loan.
Credit History
Will you repay the debt? Your lender will check your credit history to get an idea of how responsible you are when it comes to repaying obligations. If you know you’re on the lower end of the credit score spectrum, there are plenty of ways to boost your credit score—like keeping your credit card balance low, paying off outstanding debts in a timely manner and avoiding any new credit lines.
If you have questions about your credit, or want to figure out how you can give your score a boost, our team of expert lenders would be more than happy to help you put a game plan together so you can get where you need to be and increase your chances of qualifying for a mortgage loan. Simply send us a message and we’ll help you get started!
Appraisal
Once you pass the pre-approval stage, find a house and start your official loan application, your lender and real estate agent will order an appraisal for the home you’re hoping to purchase. The appraisal ensures the home’s value is sufficient to secure your mortgage, and is evaluated by an appraiser at an independent, third-party management company. Should the home appraise for less than the contract price, it is not uncommon for buyers to consult with their real estate agent about renegotiating with the seller.
If you’re ready to buy a house and would like start the mortgage approval process, send us a message! We’ll put you in touch with one of our lending experts who can help you start your journey to homeownership.
