Qualifying for a mortgage is what you have to go through if you want to buy a house. If you are new to home buying, or if you are returning to the home buying market after years of being away from it, there are three primary factors, or areas to concentrate your efforts to help you ensure that your mortgage application gets looked at in the most favorable way when it comes time to apply for a mortgage.
Credit Improvement – Any mortgage application, pre-qualification, or pre-approval comes starts with your credit report. The same can be said for buying a house or getting a new car for that matter if you are looking to finance your purchase. Home buying should always start with what is on your credit report and what are your credit scores.
If your scores are low, or if you have had issues with your credit in the past, you will need to improve your credit and credit scores before you apply for a mortgage. It is much easier to have your credit improved before you start the mortgage process, versus starting the mortgage process and trying to fix your credit report in order to get approved for your mortgage.
Debt Reduction – Debt reduction is an important part of qualifying for a mortgage for two major reasons: it can improve your credit scores which helps you qualify and it can reduce your monthly debt payments which can help you qualify with regards to your mortgage payment. You can pay down debt on your own without any guidance. However, sometimes when making payments on certain credit accounts can actually hurt your credit scores in the short term versus help you such as paying off an older collection account. With this as the case, you may be better served if you speak to an experienced loan officer to get their input about a strategy to take in reducing your debt in the most efficient and effective way leading to a mortgage qualification.
With a reduction in your debt you should see a corresponding decrease in your monthly debt payments. If this is the case, it will be easier for you to qualify and it may even help you qualify for a higher priced house. One thing to keep in mind however is that just because you can qualify for a more expensive house and mortgage payment you may not want to go up in your monthly spending.
Lender Education – This area of qualifying for a mortgage is related to learning about mortgage programs, down payment assistance programs, first time home buyer programs, as well as learning about how mortgage lenders look at certain aspects of any mortgage application. Knowing about all of these will make a difference in you getting the right mortgage program that best suits your needs. GetPrequalified.com has a lot of information on it about all of these topics.
Mortgage companies look closely at credit reports, income, and assets to make sure things really make sense.
You can think of your mortgage application like it is a story about you. If you are a sales clerk at the Gap for example and you declare that you make $40K/year yet you have $100,000 in the bank and past due credit accounts your lender is going to start asking questions about your story. For starters they are going to ask how does someone who makes only $40K/year get so much money in the bank. Next they would ask, with so much money in the bank why are there slow pays on your credit report.
If you find yourself wondering about your personal situation in qualifying for a mortgage, one of the best ways to get started is to talk to several loan officers. It is best to talk to three, that way you can get information from each one that you can compare and ask questions about. Even if you are not going to get a mortgage anytime soon, it is always a good idea to improve your credit if you need to as you never know when you’ll need better credit. And it always a good idea to have less debt.
To get started on qualifying for a mortgage please complete the form below and the few screens that follow.