Securing a home loan has become somewhat challenging in recent years, and most experts don’t expect major changes any time soon. Lending requirements are expected to remain relatively tight over the next year; however, this doesn’t preclude you from snaring a mortgage with an attractive rate. Smart borrowers prepare well in advance before they apply for a loan. To improve your chances at gaining approval, consider the following:
In this tight lending environment, good credit is very important. Acquire copies of your credit history from the three main credit-reporting bureaus. Take a close look to ensure that your report is accurate. Most lenders want a score that exceeds 680; however, some will consider scores above 620. Either way, even one minor error could send your rating below the cutoff.
Every lender will require basic documents from applicants. Instead of waiting for them to ask, have the following ready: bank statements, income-tax returns, W-2s and at least two pay stubs.
Don’t rely on lenders to tell you what you can afford. Just because you are approved for a certain loan amount doesn’t necessarily mean you should borrow the maximum. Use a mortgage calculator to help determine what fits within your budget.
Once your mortgage is approved, it’s important that you practice self-control. The vast majority of lenders will check your credit a second time immediately before the loan closes. Be sure to continue to pay your bills on time and don’t do anything that might alter your rating in the least. This includes leasing a car, applying for a new credit card or making any new charges. Basically, avoid any activity that might affect your debt-to-income ratio in a negative way.
If you received a monetary gift to help with your down payment, you will need to explain where the money came from. Borrowers are allowed to use gifts for part of their down payments; however, modern lenders require that a minimum of 5 percent of the down payment come directly from the borrower’s own funds. If you do receive a gift, bear in mind that you will have to provide a gift letter signed by the donor, and there will need to be a paper trail accounting for the money transfer. Be sure you have documentation to show how the money landed in your bank account.
If one lender refuses your application, that doesn’t necessarily mean others will follow suit. In addition to following Freddie Mac and Fannie Mae guidelines, many lenders have their own in-house policies that could trip you up.
If your lender receives an appraisal that’s too low to back your home loan, and you think it could be a mistake, contact another lender. You may not be able to order an additional appraisal or choose the appraiser; however, you can dispute the initial appraisal and/or meet with a new lender.
In an ideal world, appraisals wouldn’t vary much based on who is doing the actual assessment; however, sometimes they do. If you think the initial appraiser has done a poor job, get in touch with another lender and see if you end up with a different outcome.
When it comes to securing a home loan, it pays to have your ducks in a row. That said, sometimes it also helps to have knowledgeable experts in your corner. EddieMortgage.com is your one-stop resource for Arizona mortgage news. What’s more, our team can assist with your questions and help guide you on the path toward homeownership. For a “Loan Professional” who will always represent the interests of you and your entire family, contact Eddie today.BACK TO LIST