When it comes time to buy a home, your first major hurdle to overcome is securing financing through a mortgage. But if you’ve never had a mortgage or similar loan before, you may find the process intimidating – and even more so if your loan application is denied.
Whether you’re a first-time borrower or you’ve been through the process before, these four easy steps can help you improve your chances of qualifying for a mortgage, and will help you secure the best rates and terms possible.
Step 1: Always Have Your Paperwork Ready To Go
The first thing a lender wants to see is that you have reliable income and you don’t hold too much debt. Their primary concern will always be whether or not on paper you look like someone who could pay back the loan. Pull together any paperwork you have for each lender or debt you have, W-2s or other documents to prove your income, mortgage or rent payments, and any assets you hold.
Step 2: Make Sure Your Payments Are Up-To-Date
Lenders will look at your payment history to see if you have any trouble paying your existing and past debts. But if you miss a couple of payments on your credit card bills in the months before you apply for your mortgage, the lender is going to see that right away and may hesitate to issue you a loan.
Step 3: Pay More For Your Down Payment
From a lender’s perspective, your down payment is a guarantee of your commitment to your new home. When you put down a more significant amount, the lender feels more assured that you are committed to making the transaction work.
Step 4: Boost Your Credit Score
Lenders are looking for credit scores above 650 for most conventional loans. If you want to get the best rates and terms, you’ll need to be closer to 750 and higher. To guarantee your credit score isn’t what loses you a loan, make sure you always pay on time and pay off larger debts like credit card bills to improve your overall credit balance.
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