Getting a mortgage involves more than just getting a couple of documents signed. You have to make sure that you are qualified for the loan type you wish to obtain. Sometimes, people do not get the mortgage they want because of some overlooked qualifications or requirements. Here are some things you should do to ensure that you have a favorable rating and get your mortgage approved.
Ensure That You Have a Strong Credit Report
Lenders will first want to check your credit, so you should monitor this even before you apply for a mortgage. You should prove that you are creditworthy to land the best rates for your loan. Check your credit report for inaccuracies or factors that negatively affect your score.
Be Practical and Realistic About Your Application
Although many people would want to own a home, you have to find a loan that suits your circumstances. Look for a rate that allows you to make payments proportional to your income. If you are targeting loans that need you to provide a 20 percent down payment, but you only have five percent on hand, you should find a loan with more reasonable terms.
Understand How Lenders Do Business
Lenders prefer people with a higher credit score because it quantifies their confidence in your ability to repay debts. Although your credit score is not the only determining factor for obtaining a loan, it is one of the most important ones. Another important factor is your debt-to-income ratio or the share of the monthly gross income you put towards debts.
Know How You’ll Finance Your Mortgage
Know the types of financing available, and gauge their impact on your work and family life. For instance, a 15-year mortgage versus a 30-year one or an adjustable-rate versus a fixed-rate one will have various implications for your livelihood.
A fixed-rate mortgage guarantees payments at a stable level, perfect for someone looking for more security. On the other hand, an adjustable-rate mortgage is excellent for people who want flexibility in their rates.
Have an Idea How You Will Fund Your Mortgage
Zero down payments are rarer these days, particularly for mortgages. Before committing to a policy, you must know how you will meet those monthly payments. It helps to put down more money upfront—the larger your down payment, the smaller you would have to pay in installments.
Read Up on Penalties For Prepayment
Some lenders dislike both late and early payments. Check if there are fines for paying off the mortgage early; some homeowners double up on their payments to help them complete the terms sooner or experience a sudden influx of money. You could do this as well, but make sure your lender does not have penalties for this.
Target Your Mortgage Applications
Applying for a loan or mortgage would cause your credit report to go down. Although this is temporary, applying for mortgages over a long period could damage your score in the medium-term. When this happens, you could end up settling for a lower rate than you initially targeted. If you want to maximize your efforts, consider securing your applications in two weeks, since this counts as one inquiry.
Applying for a mortgage means being strategic about the steps you take. Inquiries like these affect your credit rating, so it is best to act when you are 100 percent sure that you can follow through. To increase your chances of success, find a broker or a consultant who can guide you through the process.
Fulfill your dream of becoming a homeowner with Mortgage City. We are a licensed mortgage originator in Detroit, MI, helping clients reach their ideal home financing situation and secure high-quality loans. Receive a free rate quote or get in touch with us today at (248) 930-8709 to learn more!