Home ownership is a major accomplishment to achieve. In order to own a home, you must prove that you can handle the weight and responsibility of a mortgage. Typically, homeowners pay the mortgages off within a span of 15-30 years. By the time the mortgage is paid off, a lifetime has passed by. Home ownership truly isn’t for the faint of heart. Because it’s such a long-term commitment, the approval rate for a home loan depends on a few factors. In order to gain approval for a home loan, take these tips into consideration.
1. Credit Score
Your credit score plays a major role in the mortgage loan process. Your credit score is compiled of a mix of factors, but it mainly monitors your relationship to debt. If your credit score is low, all hope isn’t lost. Work on your credit and build it up. If you get rid of all of your debt, eventually, your credit score will disappear and count as no credit score. While it is good to have all debts paid off, if you need a loan, mortgage officers frown on not having a credit score to check out how you manage debt. If you don’t have any debt, this is good. However, get a credit card with a low-interest rate. Use the credit card for small purchases like groceries and gas. Make sure to pay it off every month and this will help to contribute to a great credit score.
Timeliness is vital for the person who wants a home mortgage loan. One late payment can leave a really bad impression on a person’s financial history. Make it a point to pay bills in a timely fashion. Speak to a representative if you find yourself in financial trouble and payments need to be delayed. Be a good money manager. Stay on top of your budget and live beneath your means. When you have enough money set aside for emergencies, you’re able to stay on top of your bills and pay them on time.
3. Down Payment
First-time home buyers like to take advantage of the opportunity to pay only 3-5% down for a down payment. However, it looks much better to the banks when you’re able to put at least 20% down in cash. The less money you put down, the more money you’ll have to borrow from the bank. It will take some time to come up with 20%. Many people prefer instant gratification and don’t want to work hard for the results of a larger down payment. When you come in to the gate with more money, it helps with your chances of getting approved for more money at a better interest rate.
This process of getting approved for a home mortgage loan is a major one that is filled with paperwork and lots of nervous excitement. Be faithful with these tips as you prepare to get approved and you’ll end up with great results.