If you are embarking on the journey of homeownership, there are several factors that you need to consider.
The main factor to research and work on if you fall under the category of people that do not have hundreds of dollars stashed is getting a mortgage for owning a home.
A mortgage is preferred by most people, and the normal tenure of any mortgage is usually 15-30 years.
However, there are several tips to ensure that your mortgage gets approved, and in this article, we will talk about 7 Tips for getting a mortgage approved.
Credit Score is the first factor that a financial institution or a lender considers when sanctioning a mortgage to a lender.
A credit score ranges from 300 to 900 and has five categories:
- Very Good
This score is evaluated by the credit bureau and shows all your financial history, so you must check your credit score before applying for a mortgage.
This credit score also has vital information such as:
- Information about late payments.
- Number of accounts you have opened.
- Your debt levels.
- Length of your credit history.
If your credit score is more than 680, you are likely to get a mortgage with a low-interest rate. Higher the credit score, the more probability of getting a low-interest rate.
You can achieve this credit score by timing your bills and retaining the credit you are more likely to exhaust.
We have also written many articles regarding increasing your credit score, and you can go through them to embark on the journey of obtaining a high credit score.
Saving for a down payment
If you are buying a home, you must provide enough cash upfront, known as a down payment.
- The chances of you getting a mortgage increase if you provide a large down payment.
Having a large down payment also helps you in the long run as you will have to pay low interest as you will require less amount to pay the mortgage interest.
Based on the home’s price there are criteria for a down payment:
- <$500,000: 5% of the purchase price.
- $500,000 to $999,999: You will need to have 5% of the first $500,000 and for the rest of the portion you require at least 10% of the purchase price.
- $1 million+: A minimum of 20% is needed of the purchase price.
In case you pay less than 20% of the property price as a downpayment, you will require to buy mortgage insurance that will increase the interest that you will pay.
In short, saving a large amount of money and paying it as a downpayment will help you in the long run and you will be mentally stable as well.
Having a stable income
Without proving that you have a stable income and can repay your debt, a financial institution or a loan shark will not give you a line of credit for a mortgage.
- If you have a full-time job, you will be trustworthy to the financial institutions and will likely approve your mortgage request.
- If you opt for a mortgage with your partner, it would be ideal if you both work a full-time job.
Financial institutions will probably decline your mortgage request if you don’t have a stable income source.
- If you are casually employed, you must seek a full-time opportunity, even a part-time job works.
- A mortgage with a low-interest rate saves you money that you can use for any other purpose, so be sure to have a full-time job or a source of stable income.
- For freelancers, you can connect with a licensed mortgage broker, as you have to show years of payment history in order to get considered for a mortgage. The application process is smooth if you opt for a licensed mortgage broker.
Paying existing debt
If you opt for a mortgage, the tenure for the payment of that mortgage is 15-30 years.
- It is a long-term debt, so you must to pay your current debts to ease financial burden.
If you don’t have any existing debt, paying your mortgage at the correct time would be likely, and it would not blemish your credit history in the future.
Existing debt is a problem, as loan sharks will see if you have existing debt and whether you can handle a mortgage.
Mortgage pre-approval is when the financial institution or loan shark evaluates your credit history and fixes the mortgage amount, interest, and tenure for 90-120 days.
These days, you can seek your dream home while being carefree about whether you will get a mortgage or not.
Mortgage lenders seek your:
- Credit History
- Employment Status
- Debt-to-income ratio
- Assets and Liabilities
Make sure you have a green flag in all these aspects to get a Mortgage pre-approval.
Good Interest Rate
By proper research or choosing a mortgage broker, you can get a good interest-rate mortgage.
If you have a lower interest rate, you will pay less interest and probably save the extra money for any financial mishappening, emergency, or investment.
Choosing a price tag
While choosing a home, you must make sure what you can afford.
You should know your financial stability and set your needs according to it.
Choosing your dream home out of your budget will lead to financial debt.
There are several tips to get a mortgage approved, and here are some of them to help you get the perfect mortgage.