House purchase is not just looking for a good deal but if you are not paying cash there will be a need to secure a loan. If you are buying a home and realized that the mortgage rates are increasing slowly, then don’t act hastily. You can end up paying more interest every month.
To enhance your possibilities of getting mortgage approval with favorable terms then there are some steps you can take. However, there is no easy and quick way to modify your credit history length or alter your income but there are several things that can be done before submitting a mortgage application.
Even if you will not be able to fix the possible issue before applying for a loan, at least you are aware of what kind of loan to opt for or how it will impact your down payment and monthly interest percentage. Things can be narrowed down with preparations.
Get familiar with your market
Loan types depend on the real estate market you are purchasing from and the kind of home you desire to buy. E.g. in Florida many condominium projects went bankrupt, so mortgage standards are strict. The down payment can be at least 25%. On the other hand, Portland is developing with property value at an increase and the down payment can be standard 20% or less. You can get a quote for Portland mortgage rates on sammamishmortgage.com.
Preparations to make before submitting a mortgage application
Know your needs
While submitting your loan application, you will need to attach documents including the current salary/income proof. Moreover, last two years’ tax filings, three months’ bank account statements, and documentation explaining any strange large withdrawals or deposits.
Understand your affordability
In general, the majority of lenders use the 28/36 rule. It means the monthly mortgage payment must not be more than 28% of gross income along with your other debt payments must account for not more than 36% of gross income. It is not a strict rule because many lenders don’t adhere to this but it is a good guideline to figure your borrowing limits or affordability.
Improve your credit score
A credit score is an essential aspect that determines if your loan gets approved or not. If you get approval, then what will be the interest rate and other loan terms. Make sure that your credit scores are accurate and for this get a free credit report from major credit bureaus.
- Check for errors and if there is any dispute, fix it.
- If there is a balance which after paying can raise credit score then if possible, pay it off.
- Never open new credit accounts or new loans or perform any activities that need a credit check.
Pay of debt
Lenders have allotted 36% of gross income towards revolving loans, so to lower this number pay off car loans, credit card arrears, or any other loans. Paying loans or debts can make your financial health look more appealing to lenders.
Have taxes in order
Every potential lender asks for two years of tax filing. Permission will also be taken to validate the information with the IRS. It means to ensure to provide current year’s tax file documents, which must match with the paperwork you submitted to the Internal Revenue Service.