Before Applying For A Mortgage

When buying a home it is wise to know how to increase your chances for obtaining a mortgage. A lender may take several weeks processing your application. If you’ve entered into a contract on a particular home it can be disappointing to be denied by the lender.
There are several things you can do to increase your chances for loan approval.

Reduce your debts. The more long term debts like car payments, credit card, and other consumer loans you have, the less mortgage you qualify for. Formulate a debt reduction plan and stick with it. This way you will qualify for the home of your dreams and increase your approval chances.

Clean up bad credit. It is possible to obtain a copy of your credit report and review it for possible errors or items that need to be addressed. Bad debts or late payments can sabotage your loan approval. However, many lenders will work with you to clean up bad credit. Begin the process now to avoid paying higher mortgage interest rates. Those with good credit receive the best rates.

Get pre-qualified. Lenders will be happy to pre-qualify you over the phone. By answering a few questions about income and debts, in just a few minutes they can tell you how much home you can afford. They can also provide you with a good faith estimate showing anticipated closing costs.

Get pre-approved. Once you are serious about buying, you can even improve your negotiating position by being pre-approved by your lender. This may cost you a couple of hundred dollars, but it could save you thousands. It’s not uncommon for two buyers to make offers on the same house. If you are pre-approved, your offer will be more enticing to the seller.

Shop around. All lenders are not the same. Fees and closing costs may vary. Even interest rates are not the same. For example, the difference between a $100,000 mortgage at 8.0% rather than 8.5% interest is a savings of over $12,000 over the life of the loan. Talk with several lenders before deciding whom to use.

Buying the home of your dreams is possible with a little preparation. Find a lender with whom you feel comfortable and good luck!