Every borrower’s situation is unique, and every lender has different requirements. However, there are some basic steps you can take to become more qualified for a home loan. For best results, address issues with credit, debt, and employment as early as possible. Here are six tips to help ensure that you can get qualified for a home loan!
1. Protect your credit rating.
Your credit report will have a major impact on whether you are approved for a loan, so be sure to pay all of your bills on time and be as conservative as possible in your spending. While running your credit report too often can be damaging to your score, you should have a basic idea of your credit standing so you can take necessary steps to repair it. Also look out for any inaccuracies, as credit reports may contain blemishes that aren’t necessarily applicable to you.
2. Maintain a solid work history.
Borrowers with a long, stable work history are looked upon favorably by lenders, since a steady income is necessary for mortgage payments to be made on time. On the other hand, applicants who jump from job to job and have gaps in their employment are considered risky to lenders.
3. Keep debt to a minimum.
As part of the application process, lenders check the debt income ratio of potential borrowers to find out how high their debt is in comparison to their income. You can determine this number yourself by adding your monthly debt payments and dividing them by your gross monthly income. Most lenders prefer a debt income percentage of 42 or lower.
4. Avoid credit cards if possible.
Applicants with very high credit card debt are often viewed by lenders as being a greater risk than conservative credit card users. If you must use credit cards, shop around for a low interest rate, always make monthly payments on time, refrain from using the maximum amount of credit available to you, and pay off the debt as quickly as possible.
5. Thoroughly & accurately complete your loan application.
Your loan application will require you to fill in detailed information about dates/places of employment, credit history, places of residence, and sources of income. Any errors or missing information can cause your application to be kicked back or rejected, so it is important to be careful, detailed, and correct in all areas.
6. Be reasonable in your loan expectations.
When shopping for a home, make sure you have a good understanding of how much of a monthly mortgage payment you can afford to make, and gauge your home search accordingly. You will not be approved for a home loan that you are not financially able to make payments on.
If you are declined for a loan, it’s important not to lose heart. One thing to remember about your credit standing is that you can always take positive steps to improve it. For more information and to see if you can get pre-approved for a home loan, contact a Cliffco Mortgage Banker representative today!