Tips To Improve Your Chances For Mortgage Loan Approval
Buying a home can be an exciting experience, but it can also be stressful. One of the most important steps in buying your home is getting approved for mortgage loans. Finding the home of your dreams may have been a fun journey, but the excitement tends to wear off quickly during the loan process, especially if you are denied a mortgage loan. There are several things you can do to help improve your chances of getting approved for a mortgage loan, some of which are fairly simple, while other things may take some time to develop. Here are a few tips to help improve your chances of getting approved for home mortgage loans.
Improve Your Credit Score
Your credit scores play a major role in the approval or denial of mortgage loans. The first step is to pull up your credit report, which is available from three major credit reporting agencies, TransUnion, Experian, and Equifax. All three agencies will generally have different scores, they may be close, but will generally be different, so be sure to get a copy of your report from all three agencies. The higher your credit score is, the better your chances are of being approved; however, home mortgage loan companies also look at things like lateness on payments, missed payments, and the amount of open credit you currently have. If your credit score is below a 670, you should attempt to increase it before applying for a mortgage loan.
Save for the Down Payment
Start saving for the down payment as soon as possible, because, in most situations, you will need to have a down payment, which isn't generally aren't included in the mortgage loans. The down payment will vary depending on the price of the house, but in general, it's best to be prepared to have at least 10% of the asking price. So, if the home you are considering is $100,000, you should have $10,000 available for a down payment. Along with the down payment, you will also need cash for other things, such as the closing costs, home inspections, and a title search. The higher the down payment, the less your mortgage loan will be, so it's best to put down as much as possible.
Have a Budget
Before you even begin looking at homes, know your budget and stick with it. If you attempt to get mortgage loans for a home that is outside of your budget, it may decrease your chances of being approved. Be familiar with your finances, which mean you must take the time to create a realistic budget to determine how much you can really afford to pay for a mortgage payment each month. Get all of your financial documents in order, gather all of your current bills, and deduct the amount of your expenses from your total income. Always go with the higher amount for expenses and the lower amount for your finances, as this will allow you some leeway should you have a decrease in your income.
If you aren't approved for the mortgage loan, don't give up. Instead, understand the reasons why you were denied and work on improving them. For instance, if your credit score was too low, get the information necessary to learn how to increase your score, such as paying off credit cards.