While the process of obtaining a mortgage and purchasing a home can seem daunting, a little research and proper information can help to demystify the experience. In recent years, securing a mortgage has become a more difficult task. While lending standards are still high, this shouldn’t discourage an aspiring homeowner to stay put in their apartment or rented home. Wise borrowers with good credit are still able to obtain a mortgage. Here are some ways to increase your chances:
Know your credit
Good credit is crucial when it comes to getting a mortgage in a notoriously strict lending situation. It’s important to obtain copies of your credit history and credit scores from the three main credit reporting bureaus. Go over these reports carefully and take care to ensure that there are no foreseeable problems before you apply for a mortgage.
It’s common for lenders to ask for a minimum score of 680. Loans from the Federal Housing Administration allow for lower scores, but a score lower than 620 is not ideal.
No matter which lender you talk with, you will need to show some basic documents in order to apply for a mortgage. It’s best to have this paperwork available before a lender even asks to see it. These documents include: your last two pay stubs, W-2s, bank statements, and income tax returns. Keep this paperwork in an easily accessible place, and also have an electronic copy so you can send it quickly via e-mail.
Know your limits
Don’t wait for your lender to tell you how much mortgage you qualify for. Instead, plan your budget and allow for additional costs. Plan your budget carefully, especially as you’re seeking to obtain a mortgage.
Feel free to shop around
As you explore various lending options, don’t forget to do more than just compare interest rates. Interest rates are certainly important, but you should also consider closing costs and different types of loans. As a general rule, you should get estimates from three mortgage brokers and three different banks prior to deciding which combination works best for you.
Keep your credit stable
If you’ve gotten approval for a mortgage, it’s important to keep your credit stable. Many lenders will pull your credit again before the loan closes. To avoid jeopardizing your mortgage, don’t make any major financial moves during this time. Avoid applying for new credit cards, pay your bills on time, don’t finance a new car, and don’t close any accounts. Stability is important.