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How Can You Secure a Mortgage? Tips in Applying for a Home Loan

How Can You Secure a Mortgage? Tips in Applying for a Home Loan

     
November 12, 2014  |  Real Estate

Obtaining a mortgage can be particularly stressful for many. It is a tedious, often dreaded process for homebuyers, yet a vital part in getting the home of your dreams.

Here are some guidelines that lenders may find helpful:

 

Clear Credit Card and Other Debts

The debts you have, including credit card payables are calculated before securing approval from a lender. Outstanding balance could affect your credit score. It is advised therefore, to be aware of charges accumulated during the months before mortgage application. Before canceling a credit card, think twice especially if it creates long-term credit history. It is also best to avoid applying for a new card three to six months before mortgage application.

Check your Credit Score and Report

Credit score is a numeric evaluation in reference to your credit risk level. Credit report on the other hand, reflects your track record of borrowing money and paying off loans from banks, other lenders and credit card companies. Lenders review both credit score and report as one of the determining factors whether you will get approved or not for a mortgage.

Check your report before applying for a home loan to see areas that should be addressed, lest they adversely affect your mortgage approval.

Have Funds Ready for a Down Payment

Twenty percent of the home’s purchase price is the usual down payment in order to secure a loan; more if your credit history is not of solid standing. Down payment varies depending on the type of mortgage loan and mortgage company.

Lenders also verify that a homebuyer has enough funds to cover the closing costs.

Proof of Employment

Lenders will authenticate proof of employment to check if you have enough income to afford paying for a mortgage. The longer you are employed in your current company, the better your chances are of validating your employment status. Prepare the right paperwork to show to the lender to corroborate work history, including other source of income or if you are self-employed.

 

Expect to be asked a lot of questions about your income and expenses. The probing and interrogation will be there, touching sensitive areas too like filing for bankruptcy or being involved in a foreclosure. However, it is important to note that the Fair Housing Act and other federal laws regulate some questions as off-limits, so there are still restrictions.

Examples:

  • Borrowers are not obligated to disclose payments from a spouse (or former spouse), unless that information is used to qualify for the loan.
  • Individuals applying for a loan are not required to share information about child support or alimony. It is the borrower’s decision if it will be used to qualify. Paying for child support or alimony on the other hand, is required because this affects ability to repay the home loan.
  • Lenders can ask about dependents but not about planning a family.
  • The Fair Housing Act and Americans with Disabilities Act prohibit lenders from asking if you are ill or disabled.

Researching about mortgage application may not take off the anxiety, but it will surely go a long way in preparing you for this daunting process. Knowing information will help you determine if you are indeed ready to apply for a loan. Knowing the factors affecting approval or otherwise will ensure that you are well-prepared in getting the house financing you need.

 

Related Article: Pre-approved for a Mortgage? Your Checklist of Do’s and Don’ts

 

The Blake Team is a full-service Real Estate team based in Denver, Colorado specializing in working with Buyers & Sellers, foreclosures/HUD, short sales, and luxury properties. Over the years, The Blake Team’s success led by Lisa Blake has ranked us No. 18 in the nation out of all Real Estate brokerages as well as the #1 Keller Williams agent in Colorado. An award winning team to assist you in buying or selling real estate. 

 

About the author

The Blake Team is a full-service Real Estate team based in Aurora, Colorado specializing in working with Buyers & Sellers, foreclosures/HUD, short sales, and luxury properties. A team with years of experience and an impressive success rate that made it the No.18 real estate brokerage in the nation, as well as the No.1 Keller Williams agent in Colorado led by CEO & Founder Lisa Blake. The Blake Team is your No. 1 choice for getting your dream home!