qualify for a mortgage
Finance

Fast-Tracking Your Approval: How to Qualify for a Mortgage in Three Simple Steps

Home ownership is a dream for most people: it signifies freedom from renting, builds a foundation for a financially stable future, and allows for a sense of security that can permeate every aspect of a person’s life. One of the most significant leaps toward becoming a homeowner is securing a mortgage, which ensures you need only pay a small portion of the price up front.

Getting a mortgage can seem overwhelming, but following these three steps will help approach the process confident that you’ll get that all-important approval letter that lets you start searching for the perfect home.

Improve your credit

Having great credit is essential for securing a mortgage, as it shows a lender that you’re responsible with your money and will faithfully pay back your loan. A credit score shows numerous aspects of your finances, including how much debt you owe and how high your income is, and these are all taken into consideration when approving you for a mortgage.

Generally, a credit score above 670 is considered good, which improves your odds of being approved; however, to get the best rates, you want to aim for as high of a credit score as possible. There are many things you can do to improve your credit score, including paying down as much debt as possible as fast as possible, being careful with how often you open new lines of credit, and paying your bills on time, every time. With these small fixes, you’ll see vast improvements in your credit score, and therefore in your approval odds for a mortgage.

Save up for a down payment

While you’re working on improving your credit score, you also want to start saving up for the down payment and the closing costs of your home. When you submit information for pre-approval of a mortgage, they will check how much you have saved for the down payment and closing costs, and this will also impact whether you’re approved for a mortgage.

Just as with a credit score, the more money you have saved for a down payment, the better: if you want the best odds of approval, you’ll want to have about 10-20% of the total cost of the home saved. In addition, closing costs can be between 3-6%, and the lender will want to see that you have this as well.

This means that if you’d like to buy a $150,000 house, you will ideally have about $39,000 saved, with the bare minimum being $19,500. Depending on your income, this can be a lot of money, but don’t despair: make a plan for how to save money from your salary each month, such as cutting down on any extraneous subscriptions or contacting your utilities companies to see if they have any programs available that can cut costs. It can take a bit of elbow grease to cut costs, but keep the end goal of a cozy, safe home in mind, and you’ll find yourself more willing to forego some little luxuries.

Submit your documentation for pre-approval

When you’ve worked on your credit and saved up for the upfront costs of purchasing a home, it’s time to get that pre-approval, which will guide you down the path to an approval letter that lets you start looking at homes.

Many companies let you submit for pre-approval online to speed up the process; District Lending can typically get a pre-approval within a few hours so that you can start searching for that perfect house right away. While this banishes the need to walk into a bank with a stack of papers and have them scan them all into their system, you do need to have all the information available to you for this step.

In general, you need to have your income, debt, and asset information available, as well as your credit score. While the mortgage broker or bank can access your credit score from the three major bureaus with your permission, they’ll need you to input your bank statements, payroll stubs, W2s, and other documents to give them a complete picture of your finances.

The pre-approval form will take you step-by-step through this process, prompting you to provide the necessary documentation, but you can prepare yourself by keeping all this information in a folder on your computer, properly labeled and dated. If you only have paper copies of certain documents, be sure to scan them in and save them with the rest so that you’re not struggling to find it all amongst a stack of other documents. This will save you a great deal of stress as you take this significant step toward qualifying for a mortgage.

Once you’ve submitted your pre-approval letter, it’s time to celebrate! You’ve taken all the necessary steps to qualify for a mortgage, and now you need only wait to get the approval letter and begin the far more enjoyable elements of purchasing your own home: searching for a beautiful property where you can imagine your kids playing, dogs frolicking, and your family coming together for home-cooked meals. Congratulate yourself on all the hard work you’ve done to get here, and know that you’ve made a great decision that will lead to many happy memories for years to come.

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