Admittedly, investing in a house will sometimes require you to get a mortgage loan. In definition, this is the process of allowing an individual to borrow money using the purchased property as collateral. Although it sounds very simple, the truth is that it’s a lot different from getting a car loan or a personal loan. That said, it’s important to be prepared before applying for one.
Truth be told, the chance of getting approved for a mortgage loan is way lower than getting other types of loans. This is understandable, however, since investments in real estate are usually bigger. That is why, as a borrower, you should know what to do before applying for such a loan. Nevertheless, a consultant from the Primary Residential Mortgage Inc. or PRMI in Texas has given as tips on how you can increase the chances of your home loan getting approved.
1. Be Aware of Your Credit Score
The most common mistake borrowers make before applying for a home loan is not checking their credit score. Now, the problem is that lending companies are most likely to check your credit history during the process of a loan application. Needless to say, having a low credit score or having credit fraud history can result in the loan application being denied immediately.
That is why you need to be mindful of both your credit score and credit history. Better yet, you need to build a good credit history by paying your bills and debts on time. Nevertheless, you can also fix your credit score before you apply for a loan. Check your credit report regularly and fix any errors and discrepancies. This way, you’re likely to maintain a good credit score.
2. Prepare to Shell Out Cash
Although there are zero-downpayment mortgage loans available in different states, it’s actually rare to find a company that is willing to back you up that way. That said, you need to prepare to shell out some cash initially in a form of down payment. Oftentimes, borrowers are only asked to give 3% to 5% of the overall amount of the loan. However, paying more initially can give your loan application a better shot in getting approved and a lower mortgage loan value and interest. That way, you’ll get to enjoy lower monthly mortgage payments as well.
3. Have a Stable Source of Income
Another important factor a lender usually takes into consideration when processing a loan application is the debt-to-income ratio of the borrower. That is why it’s vital that you have a stable source of income. In a way, all lenders will check if you have the means and capacity to pay off the loan responsibly. If they notice that your income cannot cover your monthly mortgage, you’re less likely to get your loan approved.
Nevertheless, having a high income does not guarantee immediate approval as well. You should also check if you have other loans, debts, and credit responsibilities. Even if you’re getting a fat paycheck, your application will still be denied if you’re carrying a lot of debt.
To avoid the disappointment over a denied mortgage loan application, it’s best to take the necessary preparations before applying. After all, it is your responsibility to prove to your lender that you are a responsible borrower who can pay back what you owe.