How to Crush Your Goal of Qualifying for a Mortgage
If buying a house is ranked high on your list of goals to accomplish this year, it’s best to get started sooner rather than later. From checking your credit score and creating a budget to getting pre-approved for financing, there’s a lot that must be done.
While it’s not guaranteed you’ll qualify for the mortgage you’re hoping for, there are a number of things that can be done to help you look better to lenders. Here are four tips that can help make the process of obtaining mortgage financing a little smoother.
- Tune Your Credit Score
Having good credit is a critical factor of qualifying for a mortgage, as lenders use this score to determine financial stability and trustworthiness. Before you apply, review your credit score. While most lenders require a minimum score of at least 620, the higher your score, the better rates you’ll receive.If your credit score is lower than you thought, then take the necessary steps to increase it, including:
- Paying your bills on time
- Settling unpaid debts
- Restraining from opening new credit lines
- Keeping your balance below 50% of your total credit limit
- Save for a Bigger Down Payment
If you have enough money saved to make a bigger down payment than necessary, it will make you more favorable to lenders. This is because the bigger the initial payment, the lower your loan-to-value ratio, which means less risk for the lender. Making a down payment that’s 20% or more of the purchase price also means you won’t be required to pay mortgage insurance after closing. That said, there are still plenty of low down payment programs available for homebuyers who may not have the ability to put 20% or more down on a house.
- Gather Your Paperwork
When applying for a mortgage, there is a fair amount of paperwork involved that the lender needs to see. The process of getting it all together can be quite lengthy, potentially delaying the purchase of your dream home. If you want your mortgage qualification to go quickly and smoothly, it will help to gather everything you’ll need before applying. Doing this also helps you preemptively spot any potential red flags that could prevent you from getting approved. Here are a few initial documents you’ll want to have handy:
- Two consecutive years of W-2s
- Two recent bank statements
- Income tax returns for two years
- A month’s worth of paystubs
- Delay Large Purchases
If you’re looking to purchase a house, it’s important that you keep from making any large purchases for that house – appliance, furniture, etc. – until after you’ve closed. Lenders check your credit report at the time of application and right before closing, and a last-minute spending spree could put you in a sticky situation.
If you’re unsure whether or not you’ll qualify for a mortgage, send us a message. We can help you start the pre-approval process or put together a plan for reaching your homeownership goals. Either way, we’ll make sure you have all the information you need to start your journey to homeownership on the right path.