If you are looking to buy a home on a mortgage, it’s important to do what you can to make yourself seem like an attractive borrower to lenders. Keep in mind that a mortgage is a big financial commitment, and most lenders have a strict approval process. Here’s what you can do to increase your chances of getting approved for a mortgage.
Improve Your Credit Score
To qualify for a loan with the most competitive rate, it’s important to have a good credit score. If your credit score is too low, lenders will consider you a risky borrower and reject your application. So, before you apply for a mortgage, make sure to check your credit score.
Remain Employed and Maintain Your Income
Given that mortgage loans can last up to 30 years, lenders take your employment stability and income into account. It’s best if you have served your current employer for at least 2 years and can provide proof that your income is growing. If you are self-employed, you would need to show proof of income for the last two years at least.
Try to Reduce Your Overall Debt
Lenders also check your debt-to-income ratio when you apply for a mortgage. The reason is that if you have a lot of payments to make toward your debts every month, you may not be able to afford an additional mortgage payment as well. So, it’s best to keep your debt-to-income ratio under 43% to help increase the likelihood of the lender approving your loan application.
Save for the Down Payment
If you are applying for a conventional home loan, you will need to make a 20% down payment. So, make sure to start saving up for your down payment. Don’t make the mistake of using up all your savings to pay for your down payment. Remember that you could go through a life-altering experience at any time and you may need to fall back on your savings.
As mentioned before, homeownership is a big commitment. So, make sure to assess whether it is the right choice for you and if you will be able to continue making payments toward your loan in the long-term.
