Finding the best mortgage lender is no easy task, but take heart: with the right information, you can be an informed, confident applicant with a good shot at getting approval. Here are some of the most important tips and tricks to getting approved, plus some things to avoid. Here are some tips on how to get a mortgage approved:
Get Your Credit Score Checked
Your credit score is very important in getting approved for a mortgage loan. It shows how well you manage your finances and if you are able to pay off loans on time. If you have a good score, it will be easier for you to convince lenders that you can pay off your mortgage loan without any problems.
Apply For Pre-approval
Get pre-approved before you start looking for homes. This will show sellers that you’re serious about buying and give you an advantage over other buyers who haven’t done this step. You’ll also have an idea of how much house you can afford, which will help you make decisions during the home-buying process.
Shop Around For Your Mortgage Lender
Shop around for a good deal on your mortgage lender. You may save money by going with one lender versus another — especially if one offers lower interest rates or better terms than another. Some lenders also offer extra perks like gifts or cash back when closing on a new mortgage.
Save Money For The Down Payment
It’s always important to save enough money for a 20% down payment so that you don’t have to pay PMI (Private Mortgage Insurance). But if you’re applying for an FHA loan, then it’s even more important because FHA loans require a 3.5% down payment which is less than 20%. So if you’re planning on applying for an FHA loan, then make sure that you have at least a 3.5% down payment in hand before applying for the loan.
Have Good Credit
A good credit score of about 720 or above is considered excellent and will help make it easier to get a Mortgage approved for a loan. Having good credit means paying off any outstanding debts on time each month (including credit cards) and not opening new accounts unless necessary (e.g., if you need another credit card to boost your spending limit).
Get Your Credit in Order
If there’s one thing that will kill a mortgage application, it’s bad credit. While lenders want to see some track record of good financial decisions, they also look at the big picture — from how much debt you have relative to your income to how long it’s been since your last misstep on your credit report. A good rule of thumb is that if there are any blemishes on your report (such as late payments or charge-offs), each should be less than six months old and no more than 30 per cent of the total debt on all accounts combined.
This is one of the most important factors that lenders look at when determining whether or not to approve a mortgage application. Your DTI ratio is calculated by dividing your monthly debt payments by your gross monthly income (including rental payments). If your DTI ratio exceeds 43%, it could be difficult for you to qualify for a mortgage unless you have significant savings or assets available as collateral for a down payment on your home purchase.
Don’t Try To Negotiate Terms With Your Bank
You may think that if you negotiate with your lender, you’ll be able to get a better deal on your mortgage — but that’s not true! Lenders have very strict rules about how much they can offer in terms of interest rates and other terms. If you don’t qualify for a loan based on those rules, no amount of negotiation will make a difference anyway.
Apply With Multiple Lenders
Applying with multiple lenders at once will give you more options when looking for financing for your new home. While some lenders may turn you down because of bad credit history or other factors, another one might see fit to approve your application. This way, you’ll at least have several offers on hand when shopping around for mortgages.
There are certain things you can expect when applying for a home loan. However, the process does vary from lender to lender, and there are some things you can do to maximise your chances of getting a Mortgage approved—no matter what kind of loan you’re looking for.