Home Mortgage - Things You Can Do to Get Approval

Getting approval for a loan is paramount when looking for a new home. You may be concerned about financial issues you’ve had in the past and how they’ll affect your getting a better interest rate. Here are nine things you can do to help you get approval for the loan or the rate you want.

1. Start saving sooner rather than later – Mortgage lenders want to know you’re a good financial risk. Keep at least three to six months of expenses in a savings account or money market, and they’ll feel more comfortable loaning you money. NOTE: There are several programs that allow for minimum downpayments that are still being offered.
2. Know what’s in your credit report – You know lenders will look at your credit report; it’s important you know what’s there before attempting to get a loan. Going over your credit report allows you to check for mistakes and comment on any errors. Have a ready response to questions about your report rather than telling them “I don’t know.”
3. Get rid of debt – Having a debt-to-income ratio higher than 45% is a red flag for most mortgage lenders. They want to know you’re not overburdened with debt, so the more income you keep, the better they like it.
4. Be prepared with documentation – Find out what type of documentation mortgage lenders need. Having those documents ready and available before you begin seeking lending may speed up the approval process.
5. Respond to questions quickly – There are bound to be questions. If you can’t answer questions immediately, find the information and then respond as quickly as you can. The longer it takes you to answer a question, the longer the process will take.
6. Stay at one job – It’s common for people to change jobs, often not by their own choosing. The longer you stay at a job the better it will look to a lender. They want to see job stability to ensure you’ll be able to repay the loan.
7. Avoid making large purchases – Your home will most likely be the largest purchase you’ll ever make. Wait until you’re in your home to make large purchases and keep your debt-to-income ratio low.
8. Understand the Loan-to-Value (LTV) ratio – This is the difference between the value of the property and the size of the loan you’re seeking. As a lender, they want to see the lowest LTV possible to reduce their risk of loss. The higher this ratio is, the less likely it is you’ll receive the loan.
9. Keep your payments up-to-date – Even though mortgage lenders obtain a credit report at the beginning of the process, they may get another before closing on your loan. This alerts them to any missed payments during the process which could be a deal breaker. Maintaining on-time payments throughout the process will do wonders toward getting your loan approved.

Obtaining a home mortgage doesn’t need to be a long, drawn out process. The more you can do to be ready prior to the application, the better the mortgage lender will appreciate your effort. By following these nine things you can do to help you get approval for your home loan, you can greatly influence how quick and painless the process will be. Always make sure you meet with your lender for a pre-approval PRIOR to shopping for a home.