If you’re fed up with the high costs of renting and feel that you’re finally ready to buy your very first home, you might be unsure if you’ll be able to secure a mortgage loan.
Mortgage loan approval is significantly more tricky to obtain than other kinds of loans; personal loans, credit cards, and store credit come a lot easier than a mortgage loan. And this is simply because mortgage loans are a hefty amount, and lenders need to be absolutely sure you can afford repayments for the longer loan term.
So, before you start shopping around for real estate in Utah and other areas, boost your chances of obtaining mortgage loan approval with these five practical approaches.
Improve Your Credit Score
If your credit score isn’t high enough, you won’t receive preapproval for a mortgage loan. But there’s no need to give up yet; you can effectively boost your credit score in a couple of months by paying all your bills on time.
In addition, keep your credit usage as low as possible and eliminate debts if you can. It’s also wise to only apply for the credit you need.
Ensure Your Deposit Is Enough
Aside from credit score health, the following biggest reason mortgage loans get rejected by lenders is a simple fact that applicants don’t have a large enough deposit.
The lender will likely have a minimum deposit requirement that’s between 10% and 20% of the total mortgage amount. Instead of only saving for the minimum, try to save a bit more to boost your chances of approval.
Practice Mindful Spending
If you’ve been shopping without much concern for the length of your statements each month, lenders might reject your application based on lousy spending habits.
Practice mindful spending to prove financial discipline on your monthly bank statements.
Get Your Documentation In Order
Failure to provide all the correct information will also lead to application rejection.
You’ll need your basic contact information, proof of identity, evidence of long-term employment, and proof of additional income.
Save Money Each Month
Apart from your mortgage loan deposit, it’s also crucial to have other savings on hand. Lenders will view your application as low risk if you have money stocked up in investment accounts, long-term savings, and accessible savings accounts.
Be sure to save money each month for this; the more you save, the higher your chances will be of receiving preapproval for a mortgage loan. Moreover, saving more will secure your financial stability in the long run and prevent you from faltering on mortgage loan repayments.
In addition to the above, avoiding applying with too many lenders in one month is crucial. Frequent credit applications also downgrade your credit score substantially. So, if you receive a rejection, wait a month or two before reapplying with a different lender.
With this, instead of applying to all lenders, it’s best to compare deals beforehand to only apply to a select number of lenders offering the best deal on interest rates.