Those who have a mortgage have all gone through what you’re about to go through. And they will all tell you it was nothing more than going through the process while some learned some things the hard way they didn’t have to. There are several tips and tricks to make the loan approval process go much more smoothly and they’ll gladly share them with you if you ask them. But you don’t have to. Here are seven things you can do to get the home loan you want.
Check your credit early.
Don’t get a copy of your credit report only after you’ve applied for a mortgage. Get one in advance and regularly look at your credit. What you’re looking for are mistakes, which unfortunately is all too common. If you find a mistake, document the error and let your future lender correct the mistake for you.
Decide what you want to pay each month.
Lenders use a debt-to-income formula when determining affordability and most want to see that ratio of debt to income be somewhere at or below 43 percent of your gross monthly income. Yet borrow what you feel comfortable paying, not necessarily what you’re approved for.
Gather your financials.
Here’s what you need to start gathering:
• Most recent W2 forms
• Most recent pay check stubs covering 30 days
• Most recent bank and investment statements used for down payment and closing cost funds
• Income tax returns for two years if self employed
Research state and local first time grants to help with a down payment and closing fees. There are various resources both state and local that have funds available for first time home buyers that you may not be aware of. These grants are free money.
Save, save, save.
Save more than what you might need at the closing table. You’ll need a down payment and closing costs but lenders don’t like to see buyers empty their bank accounts completely. If you have at least three to six months of house payments remaining in an account after you close, your loan will be easier to approve.
Do you need a coborrower?
Over recent years, a coborrower has had very little effect on a loan approval. If you need a coborrower to help qualify, consider an FHA mortgage which allows coborrower income to be used in addition to yours.
Do you need to pay down debt?
If you’ve got more debt than you’re comfortable with, your debt ratios may be too high after you include the new mortgage. Take a look at your revolving and installment accounts and see if there are any loans that can be paid off or down to lighten your credit load. Make sure you record the new balances or loan payoffs as this information can take 30 days or longer to appear on your credit report.