January 19, 2015 by 2 Comments

Homes are sold every day. So while it’s harder to qualify for a mortgage, it’s not impossible. If you’re a first-time homebuyer, you may think you can’t qualify for a home loan. However, just because mortgage lenders don’t offer easy financing doesn’t mean a bank will reject your application.

If you want to buy, here are five tips for walking into any bank and getting approved for a loan.

1. High Credit Scores Rule

If you want to walk into any bank and get approved for a mortgage loan, pay close attention to your credit score. Lenders prefer applicants with high ratings. These people know how to manage credit, and excellent credit means they’re less likely to miss payments or make late payments.

A high credit score is any score over 700, but the closer you are to a perfect score of 850, the better. You can’t achieve an amazing credit score overnight, but if you pay your bills on time, pay off debt and limit your number of credit inquiries, you’ll slowly increase your rating and become a prime applicant.

2. Strive for Stability

Of course, getting a mortgage loan isn’t just about credit scores. You can have a perfect credit score, but if lenders feel your income is too irregular or unstable, this can kill the mortgage deal. Lenders aren’t willing to take risky chances, and they take into account the stability of your income and job.

To qualify for a mortgage loan anywhere, maintain accurate financial records for the past 24 months. Whether you’re an employee, self-employed, or receive regular income from another source like alimony or child support, retain bank statements, copies of checks and tax returns. Also, don’t job hop. It’s best to have the same employer for at least two years when applying for a mortgage. You may not have employment gaps, but switching employers two or three times in two years makes lenders nervous.

3. Apply for Less than You Can Afford

When applying for a mortgage, some people get as much financing as they can afford. However, if you max your housing budget, you may run into trouble down the road. Since unexpected expenses are going to happen, a better approach is applying for less than you can afford. This approach protects your personal finances, and mortgage lenders will gladly approve your application if it’s obvious you’re buying beneath your means.

4. Show the Money

Some banks have provisions to help borrowers with limited resources, such as zero down loans to those who qualify for certain programs (VA and USDA loans) and closing cost assistance. However, these provisions aren’t offered by every lender. If you want to walk into any bank and get a mortgage, save your cash. You’ll need about 3.5 percent to five percent as a down payment, and another two percent to five percent for closing costs.

5. Get Rid of Debt

You don’t have to be debt-free to purchase a home, but you’ll need a low debt-to-income ratio. Basically, all monthly minimum debt payments (including your future mortgage payment) cannot exceed 43 percent of your gross monthly income. To ensure you get a mortgage loan fast, pay off as many debts as possible before applying. This includes credit cards, auto loans, student loans, etc. This speeds the underwriting process, and the less you owe elsewhere, the lower your risk of mortgage payment problems in the future.

Truthfully, most people can’t walk into any bank and get a mortgage loan. Because no one’s situation is perfect, many people get loans from banks that offer programs tailored to their specific needs. However, if you have a high credit score, stability few debts, and plenty of cash, just about every lender will be eager to approve your home loan application.

 

Eric Khan is a Senior Mortgage Banker licensed in 23 states. Eric has been in the mortgage industry for over 10 years, and can be contacted by phone at 203-783-4593 or by email at [email protected] NMLS# 184348.


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2 Comments

  • elibaine@gmail.com' Eli says:

    This advice is invaluable. It makes a lot of sense to apply for less than you can afford, not only to appeal to the lenders, but to lessen the danger of unforeseen expenses. Most importantly, though, you must free yourself from debt, even if not completely. A lot of people have debt, so it isn’t an immediate deal-breaker, but what matters is how you deal with your debt. If you have a steady income, and your debt is steadily diminishing, it proves that you are reliable and they can expect you to pay back your mortgage.

  • solitairemist@gmail.com' Ash Solitaire says:

    This article is very helpful and relevant at the same time. There’s a lot to keep in mind here especially factor #5. Failure to pay debts before coveting to buy a new home are one of the most common pitfalls in home-buying mostly by first-time buyers. Getting a mortgage nowadays is not as easy as it may seem yet it is paramount in getting the perfect home that we’ve always wanted. Mortgage brokers play a crucial role in the real estate industry as well as the lives of the buyers. So before purchasing, we shouldn’t forget to educate ourselves about mortgage and ask the right questions to the brokers just like what I’ve read on http://goo.gl/57vb4c. Thanks for sharing this post!

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