In our previous blog, we outlined some of the mistakes borrowers make when applying for a mortgage. These issues can delay an application and/or affect a borrower’s mortgage rate and conditions. Some of these can even disqualify a borrower. Follow these guidelines to get through your application as quickly as possible and get the best rate available.
- Avoid Foreclosure
- Be on Time With Current Mortgage Payments
- Avoid Opening New Lines of Credit
- Avoid Big-Spending
- Know Your Credit Score and Credit History
- Explore All Your Loan Options
This is rather straightforward, but it still worth mentioning because of the long-term ramifications it can have for borrowers’ chances of getting approved. Being foreclosed upon can prevent you from getting a mortgage for several years under many circumstances.
Be on Time With Current Mortgage Payments
If you already own a home and are either looking to refinance or looking for a mortgage on a new home, be sure you don’t have a history of making late payments. Late payments may disqualify you from some banks or lenders.
Avoid Opening New Lines of Credit
Getting new credit cards at the time borrowers apply for a mortgage can make lenders wary. It may convey to them that borrowers won’t be able to keep up with payments as they go further into debt. This not only increases your debt-to-income ratio, which lenders pay close attention to, it can also affect a borrower’s credit score. However, asking credit card companies for increased credit limits improves borrowers’ debt-to-income ratio and can help secure a better rate.
This can be considered complementary to item #3. Buying a new car, motorcycle, or all-new furniture set at the time you apply for a mortgage can affect your loan terms significantly because it increases your debt-to-income ratio. It may not necessarily be the factor that determines whether you’re approved or not. But it can affect your rate.
Know Your Credit Score and Credit History
Credit score and credit history are two of the most important factors in getting approved for a mortgage and determining the rate. Most lenders ask for at least three credit lines that will appear on a credit report and a history with those lines of at least two years.
Explore All Your Loan Options
There are several types of loans for borrowers to explore. If a borrower is in the armed services or has served, a Veterans Administration (VA) loan may be the best option. For those whose credit score is lower and they don’t have a significant amount for a down payment, an FHA (Federal Housing Authority) loan might be worth pursuing. For those whose credit score is good and they have over 10 percent available for a down payment, a conventional loan might be the way to go.
Better Lending’s staff of seasoned loan advisors are ready to help you get the loan you need so you can get your dream home. When you’re ready to talk, they are ready to listen. Call us at 800-400-1373.
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