4 Steps How to Get Approved for a Home Mortgage

Step 1:

Make a rough estimate of how much home you can afford based on your income and current debt.

Lenders and financial experts recommend that your monthly debts should be no more than 36% of your monthly income. (For a more conservative estimate, this should be based on your take home pay instead of your gross pay.)

If you have additional outstanding debts such as student loans or credit cards, you will need to factor in those monthly payments into your total monthly debt payment. An online mortgage calculator can help you determine your borrowing power at current mortgage rates based on your income and your current outstanding debt, and will likely be the best tool for you to make this initial estimate.

Step 2:

Take a close look at your credit report.

Your credit history is one of the principal measures used by a lender to determine your interest rate. The better your credit, the better lending terms your bank or lending institution will be able to offer you. A higher interest rate translates into a higher monthly mortgage payment, and so your credit score will directly affect how much money you can borrow and at which homes you should be looking.

You should be aware of what information is on your credit report by obtaining and reviewing copies of your credit report from the three main credit report agencies.

What not to do:

If at all possible, you should avoid making a major purchase or changing your job if you're seriously considering buying a home in the next few months. This may negatively affect your credit score.

Remember that there are several factors that affect your credit report including your payment history, your current ratio of debt to income and signs of responsibility and stability. And since not all creditors report to all three agencies, it's best to order a report from all three institutions. Your goal in ordering all three credit reports is to make sure that all of the information stated on each report is accurate and correct.

The three Credit Agencies are:

1.      Equifax 888.766.0008

2.      TransUnion  800.888.4213

3.      Experian 888.397.3742

If there are any discrepancies on your credit report, it's important that you contact the rating agencies and have those records corrected. This will help you avoid hassles later on.

Step 3:

Gather the documents / Take a look at your assets and monthly expenses

Your credit history is one of the principal measures used by a lender to determine your interest rate. The better your credit, the better lending terms your bank or lending institution will be able to offer you. A higher interest rate translates into a higher monthly mortgage payment, and so your credit score will directly affect how much money you can borrow and at which homes you should be looking.

You should be aware of what information is on your credit report by obtaining and reviewing copies of your credit report from the three main credit report agencies.

These documents, in addition to your credit report, will help establish with the lender your debt to income ratio and your ability as a borrower to repay debts:

·         Social Security Number

·         W-2 Forms previous 2 years

·         Pay Stubs

·         Employment History

·         Bank Statements (3 Months)

·         Any Current Loan Information

·         Federal Tax Returns (Previous 2 years)

·         Complete Record of Assets

Improving any of these areas will help you qualify for better lending terms, so keep that in mind before you speak with a mortgage professional. If it's possible to pay off a car loan or a credit card balance before you seek financing for your new home, the preferential financing terms that you could receive may save you thousands of dollars over the life of your mortgage.

Step 4:

Talk to a qualified lender

After looking at this information for yourself, it's time to speak to a qualified lender. A professional advisor will not only be able to give you information on the best rates and terms available in the current market, but he or she can also explain to you what options you have given your unique financial situation.

There are a considerable number of choices available to consumers and I advise you to learn as much as you can about the different lending options that are available to you.

Talking to a lender at this time will help you get a more accurate idea of what you can afford. 

Search for your Dream Home Now? Why Wait! 

Centennial CO Real Estate- Mike Conner, is a Licensed Colorado Realtor with EXIT Realty DTC – I list and sell homes in Centennial, Aurora, Parker, Highlands Ranch, and all nearby communities. Visit my Website to see local available home listings or to get your Free Home Evaluation.  Call or text Mike today at 720.422.1765