Buying property is something you have to approach meticulously. Most of the time, buyers cannot pay in one go, so there’s a need to apply for a mortgage loan that will be paid for years. Because mortgages can be difficult and you need to seek approval, you must know how to take essential steps to better your application.
1. Avoid Large Purchases a Few Months before Starting an Application
Most banks and lending institutions ask for up to five years of your financial records to determine if you’re eligible for their mortgage. Your records should show the consistency of income and regular payments. That’s why it’s best to avoid big purchases such as vacations, electronics, and jewelry just before preparing for your mortgage application.
2. Review Your Credit Report to Check for Mistakes
Your credit report is your ticket to getting approved for a mortgage. So, you must check for any errors that may have been made in listing and calculating your information. Mistakes could include late payments, errors in the repayment history, or incorrect contact details. Make certain to dispute any inaccurate information so that your score will not be affected negatively.
3. Boost Your Credit Score
Having a good credit score is one of the key factors lending companies consider before granting you a mortgage. Your credit score provides lenders with a gauge of your financial responsibility and shows how good you are at repaying your debts. If you want to ensure that you’ll be approved for a mortgage, you must work on boosting your credit score.
The quickest way to boost your credit score is to maintain a 30% or lower balance on your credit cards, pay your loans and bills on time, and keep your outstanding balances low.
4. Improve Your Debt-To-Income Ratio
Your debt-to-income ratio or DTI is another crucial aspect lending companies consider when granting you a mortgage. Your DTI indicates how much of your income is used for paying your debts. You should have $300 for each $100 of your gross monthly income as a rule of thumb. If your DTI is under 30%, lenders will likely approve your loan.
5. Save Up for a Larger Down Payment
A down payment is an amount you pay upfront when buying a property. A down payment is typically 20% of the property’s worth. However, if you’re approved for a mortgage, the Federal Housing Administration allows you to use an FHA mortgage loan. With the FHA loan, you only need a 3.5% down payment to purchase a home.
However, if you want to be confident that you’ll be able to get a mortgage, aim to save up more than 20% of your home’s worth.
With the tips in this article, you have the keys to getting your home mortgage loan approved. However, remember that there is always a chance that you might be rejected for a loan. In such scenarios, don’t give up. Keep making attempts, and you’re sure to find a solution that works for your situation.
If you’re looking for a home loan in Colorado Springs, you can apply at Total Lending Concepts. We offer home loans to fit numerous to fit in every situation—whether it’s your first time or you’re ready for your dream home. Send in an application today or contact us for more information.