How To Get Approved For A MortgageSeptember 6, 2018
Congratulations on choosing the wonderful path of home ownership! Before you can enjoy everything that this wonderful decision has to offer you, you will need to start the mortgage application. Facing a mortgage does not have to be as frightening as it first appears. At Perry Homes, we are here to outline what the lenders are looking for, tips for how to get approved for a mortgage, and the steps you will have to follow to move into your dream home!
What Are The Lenders Looking For?
Before you you can start applying for a mortgage, you need to be aware of what lenders will be checking on before they can approve your application. What exactly are they looking for when they collect your tax returns, pay stubs, and other documents?
- Ability To Repay Loan
When a lender loans out money to an individual or family, the most important part is getting the money back! Your lender will look through the different documents you present to them and verify that you have the income and financial stability to pay the mortgage rates and be able to repay the loan in a reasonable amount of time.
- Value Of The Home
How much is your potential home going to cost? When determining whether or not they will approve your application for a home loan, the mortgage lenders will compare your income and savings to the home that you wish to live in. If they feel that it is reasonable for you to be able to afford it, they will be more likely to move you forward in the process. You can use our handy mortgage calculator on our site to estimate your costs on your new Perry Home.
- Down Payment
The amount of money you are able to spend on a down payment is a big factor in whether or not you are approved for a loan. If you are able to put down a large down payment, your loan payment will be lower and the lender will be more than likely to approve your loan application. The more that can be paid upfront, the better your chances and the easier the mortgage application will be in the long run.
What Are The Next Steps?
Now that you are aware of what the lenders are looking for, we will give you tips on how to get approved for a mortgage. Successful mortgage acquisition takes careful decision making — before, during, and after the process. Keep these in mind as you prepare for the next phase of your life into homeownership and speak with your real estate agent about any questions you encounter.
- Start A Savings Plan
Long before you even begin to look for homes on the market, you need to formulate a savings plan. Speak with your spouse or anyone whom you wish to buy a home with and talk seriously about how you are going to save money. Whether that means living in cheaper accomodations in the meantime or simply going out to eat less, the bigger your savings fund the better. The more you save, the larger your down payment, the smaller the mortgage payments, and the greater the chance of getting your future mortgage approved.
- Be Aware Of Your Credit Score
Bad credit is one of the biggest problems individuals face when applying for a mortgage. The minimum credit score needed to get approved will depend on which type of loan you wish to apply for. Because credit score is the biggest deciding factor in determining mortgage rates, you want to get it as high as possible before starting to apply. Make sure you have checked your score and credit history before applying, and thoroughly peruse the documents for any potential errors that may show up. Try to get credit card balances and other debt sources as low as possible to best help your chances.
- Calculate Your Debt To Income Ratio
As briefly mentioned above, debt is an important factor to consider before purchasing a home. Your lender will require at least two weeks of pay stubs, so it is wise to begin collecting these. If you work a freelance job or do not have a steady monthly income, the process may take more time. In order to get approved, you must be between certain ratios that lenders use to determine how much you can afford for a mortgage payment. If you have any large debts, the size of the mortgage approval will potentially be smaller. Throughout the approval process, avoid taking on any new loan payments.
- Determine Your Budget
With the knowledge of your credit score as well as your debt to income ratio under your belt, it is now time to determine what you can afford to spend on a house. Lenders are much more likely to approve applicants who are realistic about what they are reasonably able to purchase and then pay off. Think about the everyday expenses in your life, from groceries to internet to fuel for your vehicles. What is a comfortable amount of money to spend on a mortgage payment every month for you?
- Look For Ways To Get Your Payment Down
There are many ways to get a lower mortgage payment outside of working with your lender. If you are a first-time buyer, there are several programs that exist to help you find a lower rate on your mortgage. If you are still not happy with the rates you are receiving, it may be worth finding a co-signer to help keep your mortgage payments low.
There are three major steps to the mortgage approval process: pre-qualification, pre-approval, and mortgage commitment:
Pre-qualification is an informal process in which a mortgage professional interviews applicants about their income, assets, and expenses. This gives you a vague idea about the price range of homes you may be able to afford. While pre-qualification does not mean that you will be approved for a home, it does provide you with valuable information for moving forward in the process.
Pre-approval involves the lender looking closely through your credit reports, employment history and income to determine which loan programs you may qualify for, the maximum borrowing amount, and the interest rates that you will be offered. A pre-approval letter will be drafted with any conditions that must be met for full approval.
- Mortgage Commitment
A lender will then issue a loan commitment to an underwriter, who will return one of four decisions — approval, approve with conditions, suspended, or denied. If you are approved, you have 90 days to accept the mortgage.
Whether you’re a first-time home buyer or looking to purchase your second or third new home, Perry Homes is with you every step of the way. We understand the financing and mortgage process can seem overwhelming at times which is why we have selected Crestmark Mortgage as our preferred mortgage partner.
Visit our website to find your new Perry Home and start the financing process!