How Do I Get Approved for a Home Mortgage Loan?

When applying for a mortgage loan, it’s important to ensure that you’re prepared for the home buying process. Lenders take many factors into consideration when reviewing your application. To bolster your chances of securing a mortgage approval, it’s a good idea to familiarize yourself with these factors and to prepare yourself properly. Here’s what you need to know about getting approved for a home mortgage loan:

Save Up

One of the best things you can do for the future of your mortgage is to start saving up now. Because the requirements for mortgage approval are always changing, you never know how much money you’re going to need to set aside in your bank account for a rainy day. Mortgage rates and loan amounts are also in a constant state of flux, which means you’ll need to be prepared if you ever need to secure a preapproval letter later on.

Check Your Credit Score

Another important aspect of your mortgage application is your credit score. Simply ordering your credit score can put you ahead of most people in terms of financial preparation. While every mortgage lender is different, many lenders may choose to deny you a home loan if your score is 680 or lower. By taking the initiative and checking your credit report, you can determine how qualified you currently are.

Calculate Your Debt-to-Income Ratio

Your debt-to-income (DTI) ratio is a key determining factor in the mortgage approval process. Mortgage lenders want to be confident that borrowers can fully repay their mortgage loans in the future. To determine this, they assess your bank statements, pay stubs, and tax returns. Lenders then use this information to calculate your DTI ratio and see how it measures up to their requirements. It’s worth noting that most lenders prefer a DTI of 45% or less, so be sure to aim for this area.

Determine if You Need Private Mortgage Insurance

Borrowers with a down payment of less than 20% are normally required to have private mortgage insurance (PMI). This form of insurance typically raises your monthly mortgage payment, so it’s best to aim for a down payment of 20% or above. In addition, most lenders will refer to your documentation to determine whether you’re capable of covering closing costs after your mortgage closes in 90 days or less.

Consider Your Home’s Value

Every home buyer should be sure to consider the value of the home they plan to purchase. After analyzing the home’s value according to real estate agents, lenders calculate the loan-to-value (LTV) ratio and determine whether it meets loan program guidelines. Generally speaking, a lower LTV corresponds with a higher home value and less money owed on it. If you’re planning on securing a conventional loan, try to keep your LTV ratio at around 80-95% or lower.

Maintain Steady Employment

Unfortunately, now is not the time to say goodbye to your boss and start hunting for a new job. If lenders notice any changes to your employment status or your income and assets, this may significantly delay the mortgage approval process. This is especially true if you decide to take up a freelance gig or accept a position that pays less than your current role.

Loan House: A Mortgage Lender You Can Trust

As a top mortgage lender selling mortgage finance products, we strive to help borrowers achieve their goals through our products or services. Whether you use a credit card or another payment method to pay your mortgage, we’ll be there to help you navigate the mortgage approval process with fewer headaches and more confidence. To learn more about applying for a mortgage loan that’s right for you or following mortgage rates, contact Loan House today.

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