Applying For a Mortgage? How to Prepare For Success
By Sharon Secor,
il-odm.org Staff Writer
Applying for a mortgage is a big step, one that can be quite intimidating, especially for consumers that are embarking upon the process for the first time. Understanding the steps of the mortgage application process before you apply can help make it faster and less stressful. A good working knowledge of the factors that will be used by your lender to evaluate your application can help you get approved, allowing you to be sure your affairs are in order before you get started. With a bit of preparation, you can arrive at the office of your lender with all required documentation well organized and ready to be evaluated, helping to tip the odds of approval in your favor.
Before You Apply: Getting Your Finances in Order
The first step in increasing your chances for a successful mortgage application is to evaluate your credit standing. Obtain a current copy of your credit report from each of the three major credit bureaus for a preview of what your potential lender will see when evaluating your credit worthiness. Even if you are confident that your credit is stellar, this is an important step in preparing for your mortgage application, as mistakes are quite common, found in more than 40 percent of consumer credit reports. If your credit report does contain problem entries or errors, resolving them before you apply for your mortgage can make approval easier.
A careful evaluation of your finances is another key step in the preparation for a mortgage application. Calculating your expenses and income accurately is important, helping to determine the monthly payment amount that will be affordable for you. An evaluation of your savings and assets is necessary in determining the amount you can comfortably dedicate to a down payment on your new home. Be sure to include expenses incurred during the mortgage process in your budget plans, such as loan origination fees and closing costs.
Decreasing your debt level is a wise step to take before you apply for a mortgage, as a consumer with a high debt to income ratio will often pay a higher rate of interest. Paying off credit card accounts and other outstanding bills can increase your chances of approval, as well as helping you to get the lowest possible interest rate on your home loan.
Do some research on the most common types of mortgage loans to make an informed decision on the best one to suit your needs. Armed with a bit of basic knowledge on the subject, you will be much more likely to secure a mortgage with the most reasonable rates and terms possible.
Choose Your Lender and Apply
Once you have taken these steps to prepare for your mortgage application, approaching a lender is next. Be sure to shop carefully when choosing a lender or mortgage broker. Checking into the loan approval percentages of your lender or broker and their reputation in the industry is a wise, helping to ensure that you will be treated fairly.
Your lender will require a variety of documents from you at application. The full name, date of birth, and social security number of each person who will be listed as a borrower will be necessary, and a release form must be signed to allow the lender to secure your credit reports. Your banking information will be required, complete with statements from all accounts going back 3 months, account numbers, and a signed release allowing your lender to verify your banking information. Proof of income, such as pay stubs or tax returns, and proof of employment will be required documentation, as will an accounting of your consumer debt. Lenders requirements do vary, so be sure to call ahead for a list of documents to provide at application.
The consumer that has done their homework before applying for a mortgage is sure to find the road to loan approval easier and faster. With an organized approach and all of your paperwork in order, you can sail through the mortgage application process and get the approval you need to make your dreams of a new home a reality.