Mortgage loan debt has steadily increased in the United States to surpass $9.5 trillion in the first half of 2019. With favorable interest rates, this number is only expected to rise.
If you’re currently looking to purchase a home, then you’ll want to set the odds in your favor. Follow these tips to ensure your home loan approval odds are as favorable as possible.
Organize Your Paperwork
Applying for a mortgage requires a ton of paperwork. You can make the process go faster and smoother by having all of your required documents in order before you apply.
- W2 forms for the past two years
- Paycheck stubs showing your income for the past few months
- Proof of a previous mortgage
- Proof of rental payments for the past year
- A complete list of your debts
- Full detail of your current credits cards and their balances
- Student loan information
- Auto loans
- A complete list of your assets
- Your bank statements
- Auto titles
- Real Estate owned
- Investment accounts
This list isn’t exhaustive, and you may not have everything on this list. As you can see, it may take time to get all of this information, so having it ready will give you a more complete application, which will improve your odds of approval.
Make On-Time Payments
If you can’t make your current payments on time and in full right now, then how do you expect to make your mortgage payments? You need to show lenders that you can afford your mortgage by paying all of your current debts on time and in full.
You risk the lender re-pulling your credit during the application process if they find out you’ve missed a payment. A missed payment could lower your credit score and mean the difference between approval and denial.
Save for a Large Down Payment
Lenders are more favorable to applicants that can pay a percentage of the purchase price upfront. The more money you put down, the less likely you’ll be to walk away from a property. This means that you’re more likely to repay your entire debt and less likely they’ll have to foreclose on you.
Being able to pay a large sum upfront is a sign that you know how to budget and manage your finances.
Improve Your Credit Score
Credit scores range from 300 to 850. The higher your score is, the more likely you are to get the best rates offered. A general rule is that you need a score of over 600 to qualify.
You can improve your credit score by paying down your outstanding debts. For some, this isn’t possible to do right away. In this case, these loans have terms to help you manage your multiple debts.
Improve Your Home Loan Approval Odds
By taking heed of these tips, you can improve your financial situation and improve your loan approval odds. By having all of your documents ready and your finances in order, you can show lenders that you’re worthy of a mortgage.
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