The information provided on this website does not, and is not intended to, act as legal, financial or credit advice; instead, it is for general informational purposes only. Information on this website may not be current. This website may contain links to other third-party websites. Such links are only for the convenience of the reader, user or browser; we do not recommend or endorse the contents of any third-party sites. Readers of this website should contact their attorney, accountant or credit counselor to obtain advice with respect to their particular situation. No reader, user, or browser of this site should act or not act on the basis of information on this site. Always seek personal legal, financial or credit advice for your relevant jurisdiction. Only your individual attorney or advisor can provide assurances that the information contained herein – and your interpretation of it – is applicable or appropriate to your particular situation. Use of, and access to, this website or any of the links or resources contained within the site do not create an attorney-client or fiduciary relationship between the reader, user, or browser and website owner, authors, contributors, contributing firms, or their respective employers.
Credit.com receives compensation for the financial products and services advertised on this site if our users apply for and sign up for any of them. Compensation is not a factor in the substantive evaluation of any product.
Sometimes, when your credit is less than stellar and you’re not making a huge paycheck, getting a mortgage can be tough. But there are some things you can do to make it easier. For starters, put yourself in a banker’s shoes: Would you want to give a few hundred thousand dollars to someone who might just walk away from a house they couldn’t pay for? Of course not. So you’ll need to prove that you’ve “got it all together” by making a good case for yourself. You’ll want to seem like a bright and shiny candidate who can repay the loan if just given the chance.
Here’s some tips that lending experts say can improve your odds of getting approved for a mortgage.
You’ll need W-2 forms for the past two years, paycheck stubs from the past few months, proof of previous mortgage or rent payments for the past year, a list of all your debts, including credit cards, student loans, auto loans and alimony, and a list of all your assets, including bank statements, auto titles, real estate and any investment accounts, Paul Anastos, president of mortgage lender loanDepot’s retail division, said in an email.
This one is pretty serious, because you want to show you have a really good record of paying your bills. (If you’re curious about your past record, you can view your free credit report card, updated every 14 days, on Credit.com.)
“If you miss a payment during the loan application process — particularly a mortgage payment — and the lender re-checks your credit report, it could result in a much lower credit score and could derail the loan application,” said Anastos.
Remember, your credit score can keep you for getting a mortgage or affect your mortgage rate (more on that below).
If a lender sees you’re able to pay for a percentage of the house, the odds may tilt in your favor. The larger your down payment is, the less likely you’ll walk away and let the property go into foreclosure, because you’d very likely lose that downpayment if the house foreclosed.
“Having a large amount of cash to put down on a house is also an indicator of how you handle your finances,” Mindy Jensen, real estate agent and community manager of BiggerPockets.com, said in an email. “Banks want to give loans to people who will pay them back.”
“You might be pre-approved for up to $250,000, but the closer you get to that limit, the less likely you are to be approved. It only takes one small thing to push finances into the danger zone, and one unexpected expense can steer you into ‘DENIED’ territory,” said Jensen.
Most credit scoring models run from 300 to 850. You generally need a score of 620 or higher to qualify for a conventional mortgage and a score of 740 or higher to net the best rates. So, if your score is looking shoddy, you may want to put some work into improving your standing before you apply.
Also, pay down your debts because the less debt you have, the more likely you are to be approved for a loan. “Lenders like to lend money to people who don’t really need it, as opposed to people who are desperate,” said Jensen.
“If you are hovering near the loan limit, leave your credit cards alone,” said Jensen. “One large purchase — say a new TV for your new house, or buying/leasing a car right before closing — can completely derail your loan application. Wait until the ink is dry on all the papers before you buy a new toy.”
Image: monkeybusinessimages
December 13, 2023
Mortgages