Next to finding your dream home, getting approval for a mortgage to buy the property is the most important step in the home buying journey.
While I am certainly no expert in home financing, I have listed my top eight tips on how to put yourself in the most favorable light with the bank that is helping you with your mortgage:
- Prove your stability. If possible, don’t jump around to different jobs too often. Banks like to see consistency in your paychecks and employment over a long period of time.
- Keep your credit score high. Buyers with credit scores over the 700 mark are typically given the best possible interest rates. (More about credit scores later.)
- Lower your debt-to-credit ratio. Banks love to see you have credit cards with low maximum limits and low balances.
- Cash on-hand. Save enough for both the down payment and closing costs. Closing costs can equate to approximately 3% – 5% of the loan, so make sure you have that covered.
- Pad your savings account. Banks like to see that you have saved some money for any mishaps that life might bring.
- Pay your bills on time. Late payments serve as a red flag to banks since, to their way of thinking, they indicate a lack of dependability and financial security.
- Have your paperwork ready. Being organized and having proof of your job stability, income and credit history ready in advance shows you to be a serious homebuyer.
- Be accurate. Falsified information is a no-no, and so are outdated records.
The importance of the credit score can not be understated for anyone who is applying for a mortgage loan, or any other loan for that matter. It’s highly recommended that you do your own credit homework before the mortgage application, so that you won’t be caught by any surprises.
Indeed, there may be some ways to clean up your credit history beforehand that could improve your chance of getting approval for the loan you seek. The ways in which a credit score can be bumped up are pretty common knowledge but are worth repeating: Always pay on time, pay debt off quickly, review your credit history and dispute wrongdoings on your credit report, and say ‘no’ when the clerk of the department store offers to sign you up for a store card.
This was the sixth article based on my book Keep Calm…It’s just Real Estate. Stay tuned for more great tips from the eCommission team and myself!