Mortgage loans can be hard to get. When applying for a home loan, the procedures, requirements and process of loan approval, appears to be a puzzle. Here are four tips that can assist you in getting your Mortgage Loan approved.
Many borrowers do not consider checking their credit score, even when it hardly takes any time to pull it out. The most common mistake that buyers make is that they fail to acknowledge the chances of an identity theft and assume that their credit score is high enough to qualify for the loan.
According to the Home Loan Learning Centre, there is a threshold value that has to be met, so that the lenders do not deny your mortgage loan. This minimum value is 680, however for FHA mortgage loan the requirement is 620. Factors like several missed payments, frequent lateness influence the credit score and bring the numbers down.
A lender can deny your application if your score is less than the threshold value or if the credit score reflects a fraud. The best way to increase your credit score is by paying your bills on time, clearing up the credit history and making amendments in the credit report.
Keep the Cash
This is important if you are planning to apply for a home loan in the future. When you walk into the lender’s office with no cash, the prompt answer will be a ‘NO’. You need to have a considerable amount of cash as down payment.
The requirements are not fixed and change according to the lender and the type of loan. On an average, the requirement is 3.5% of the loan amount as the down payment. Aiming for a higher down payment, say 20%, is the best strategy.
This will also alleviate you from private mortgage insurance or PMI. If you do not have to pay PMI, you can enjoy much affordable mortgage payments.
Keeping The Job
Job security and a stable income can help while getting mortgage loan approval. It is advisable that one should avoid any major changes in the income status while the mortgage loan is yet to be approved.
Lenders approve the loan by referring to the documents that are provided by you and thus, determine your status in the future to predict if you will be able to pay back the loan or not. Therefore, it is recommended that you must not leave or take a lower paying job or become self-employed, as such a case would require revaluation by the lender to assess if you qualify.
There are many lenders who approve the loans that unaffordable for you. If you receive a pre-approval form a lender for an amount that makes you recheck your Tax return, that is, if the loan amount is too high then you expected then make sure you assess the case yourself.
Choose a home that is in your budget and do not get flattered by the generosity of the lender. Lenders provide pre-approvals on the basis your credit score and salary, without considering elements like expenditure on day care, groceries, or travel.
Getting a home loan is not as hard as it appears to be. Once you meet the requirements and take necessary measures, you can be sure that your loan will be approved. Keeping your job and maintaining a cash reserve can further ease out the process of borrowing. Make sure that you are dealing with a legitimate lender and perform a self-assessment.