Getting qualified for a mortgage is the most important step when becoming a homeowner. Whether you’ve already found your dream home or just started working with a realtor, you need to be approved for a mortgage to buy a house. Unfortunately, many people have a difficult time understanding the process and what’s required of them to get approved for a mortgage.
The most important thing to remember when applying for a mortgage is that the lender wants to ensure you can repay your loan. If you’re denied a mortgage loan, try not to take it personally; instead, take steps to improve the factors that may affect your eligibility. Of course, it’s always best to ensure you’ll be able to afford a home before you apply for a mortgage. When you’re ready to buy a house, you’ll need to apply for a mortgage to ensure you can afford the loan. Being in good financial standing can help you get qualified faster and with a better interest rate to help you save over the life of your mortgage loan. Ready to buy your first house? Here are tips to get qualified for your mortgage.
Check Your Credit
Your credit report is one of the most important factors to consider when applying for a home loan. Getting a home loan means trying to prove your creditworthiness to help you get the best interest rate possible and keep your monthly mortgage payment low. Therefore, it’s always best to check your credit report before you apply for a mortgage loan to ensure there’s nothing that can prevent you from buying a home.
When looking at your credit report, ensure all the information is accurate and that your score is high enough to qualify for a loan. If possible, devise a plan to improve your credit score before applying for a home loan with a mortgage lender to help you lock in the lowest possible interest rate.
Buying a home is one of the largest purchases you’ll ever make, so it’s best to be prepared for anything. When you first decide you’re ready to become a homeowner, always do your research to ensure you can afford it and won’t be putting your financial future in jeopardy. Research different loans, rates, and lenders before committing to anything. You never know when another loan from another lender will be a better choice for you based on your unique needs. Doing research can prevent you from making the wrong decision when looking for a lender or loan.
Everyone wants to be able to afford their dream home, but very few people actually can. When starting your journey towards home ownership, always be realistic about what you can afford. For example, if you want to get a low-interest rate but can’t afford a 20% down payment, you might have to accept a higher interest rate just to be approved for a loan. Always do your calculations based on facts rather than your dreams. While it would always be nice to put as much money down on a home as possible, not everyone can, so you can expect to pay a higher interest rate.
Decided on Loan Terms
Whether you choose an FHA, conventional, or non-QM loan, you’ll need to determine which loan terms are best for you. You can typically choose between a 15- or 30-year mortgage that’s adjustable or fixed. If you’ve already done your research, you’ll know the pros and cons of each option to help you determine what’s best for you based on your current financial situation. For example, if you want security, you’ll choose a fixed-rate mortgage.
Save for a Larger Down Payment
It can be easy to get impatient when you decide you want a house because of all the excitement about such a major purchase. However, it’s always best to have a larger down payment when applying for a loan. The more you can put down on a home, the more options you’ll have. Additionally, putting more money down now will save you because the higher your down payment, the lower your mortgage bill will be each month.
Get a Cosigner
It’s easier for two people to get a house than it is for one person because you can combine your incomes. Cosigners, whether they live in the house or not, will have their income included in the affordability calculations mortgage lenders perform to determine whether you can afford to buy a house and how much you can afford. Of course, you shouldn’t just choose any cosigner; your cosigner should have a good employment history, stable income, and good credit.
Don’t Leave Your Job
Staying at your job when applying for a home loan is important because lenders need to see that your income is stable. However, if you plan on leaving your job soon, now might not be the best time to buy a house because lenders must ensure you’ll be able to pay back the loan. Staying with your current employer when going through the homebuyer process may seem like a no-brainer, but many people leave their jobs during the process and lose their eligibility for a loan.
Of course, while employment history is important, many lenders are willing to overlook recent employment history if you’ve changed jobs but stayed within the same type of role for the last few years. So, for example, if you recently left a lower-paying job for a higher-paying position, a lender might be willing to overlook the fact that you haven’t had that same job for at least two years.
Qualifying for a Mortgage
The best way to determine if you’ll qualify for a mortgage is to get pre-approved. Pre-approval is different from applying for a loan because the lenders don’t typically check all of the information you provide until you’re ready to apply for the actual loan. However, a pre-approval can help you determine how much house you can afford based on your current financial situation.
Ashley Nielsen earned a B.S. degree in Business Administration Marketing at Point Loma Nazarene University. She is a freelance writer where she shares knowledge about general business, marketing, lifestyle, wellness or financial tips. During her free time she enjoys being outside, staying active, reading a book, or diving deep into her favorite music.