6 Ways to Make Applying for a Mortgage Easy

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The most expensive purchase people make is a home. In our lifetimes, most people will only buy one or two. Finding out if you qualify for a mortgage can be a daunting process that many aren’t prepared for. After all, asking a bank for a loan isn’t something people favor doing. There are ways to make applying for a mortgage easier.

1. Pay your debts.

This is something you should begin doing before you start applying. A lender will also look at your credit utilization ratio: what you use, versus how much you have to use. A general rule of thumb is that you should never use more than 30% of your credit limit at any point.

2. Don’t be shy. Look at your credit score.

You have to do it. Your credit score WILL affect whether or not you get approved. Create an account with a free credit site like Credit Karma to see a breakdown of your credit report. They will show you your score, recommend who to consolidate with, which credit cards are best for you and more.

3. Take steps to improve your score.

The best way to do this is to pay off a balance in full. Also, do not open any additional credit cards during a mortgage process, because lenders do not like seeing too much credit. Too much open credit shows a risk of gaining more debt, which interfere’s with your ability to pay your mortgage.

4. Do not bite off more than you can chew.

It’s important to understand how much house you can afford. Take into consideration the 28/36 rule. This means that your monthly housing costs should not exceed 28% of your gross income, and your monthly debt costs should not exceed 36% of your gross income. Try a home affordability calculator to give you an idea of where you stand.

5. Get organized.

Make sure all of your paperwork is ready for review. Before you apply for a mortgage, put a folder or binder together and update it as you go. Include recent pay stubs, two years of taxes, bank statements and any documentation of investments. A lender could ask for this information at any point after approval, but before the closing date.

6. Be prepared to explain everything.

If you have extra income that your provided paperwork does not show, a lender may ask about it. For instance: if you receive a large amount of money as a gift for your down payment, you may have to fill out additional paperwork and have the contributor sign it. Get ready to explain everything from a bonus to a scratch-off lottery ticket winning. A lender just wants to be verify that the financial picture you have shown them is realistic.

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Brent Vullings

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