No matter if you don’t plan on buying a home in the near future or if you’re ready to start looking at homes, it’s never too early to prepare for the mortgage process. Wyndham Capital Mortgage wants to share five essential steps to take before you apply for a home loan.
1. Check Your Credit Score and Report
Even if you aren’t buying a home, it’s still a good idea to pull your credit report occasionally in order that you know what lenders, landlords and potential employers see if/when they pull your credit. By checking your credit report, you can see whether there are any discrepancies or mistakes to clear up before you apply for a mortgage. Know that the three major credit bureaus offer consumers free annual credit reports from each of them, which means you can check your credit report for free as many as three times a year.
While you’re taking care of outstanding balances and errors, make an effort to build or repair your credit. Even if you have good credit, it never hurts to see if you can improve it further. Doing so might net you an even better rate on your future mortgage.
2. Keep Your Debts to a Bare Minimum
This tip applies more to those who are looking to buy a home in the near future. Your debt-to-income ratio will have a huge impact on your overall mortgage, which means it’s best that you have more money coming in than you do going out. Lenders want to know that you’re responsible with your finances, and what better way to determine that than to see how much and what kind of debt you have? In the months and weeks leading up to you applying for a mortgage, be sure you avoid putting major purchases on a credit card.
3. Boost Your Savings
Something else lenders like to see is borrowers with the financial resources necessary to easily handle their mortgages. As you’re checking your credit and keeping your debts low, start putting money into a savings account or an account for your down payment. You’ll likely have to explain any large sums of money in your bank accounts, so make sure you have a good (and believable) answer prepared.
Related: How Much Home Can You Afford?
4. Keep Up With Your Bills
Don’t let your bills fall to the wayside while you’re checking out homes and mortgage offers. If lenders see you aren’t too keen on paying your bills on time, they could get the impression that you won’t pay your mortgage on time. If you can pay bills early, do so. Every little bit serves as a big help to increasing your chances of mortgage approval.
5. Keep Your Job
It’s essential that you maintain balance in your life while you’re in the process of applying for a loan. Even if you quit your current job for a new position that pays better, there’s still a chance your mortgage application will be rejected. Lenders like borrowers with stable incomes, and switching jobs close to when you apply for a mortgage could result in you not having a pay stub to show you have that stable source of income. If you have no choice but to change jobs while applying for a mortgage, see if there’s any way the payroll department can provide you with an advance on your pay or something else that shows how much you’ll take come going forward.
As you learn how to apply for a home loan, be sure to keep these five tips in mind. A few could mean the difference between being approved for your loan and being forced to look elsewhere for a lender. More questions? Let us help!