When consumers are approaching the mortgage process – especially when they're doing so for the first time – they may need to put in plenty of legwork to make sure they're able to qualify. That often means doing plenty of homework and putting in a few months' worth of effort to improve credit standings and other aspects of their personal finances.
Perhaps the most important thing for people to keep in mind about the mortgage process, though, is that they should be prepared to go to a number of different lenders rather than just working with the first one that approves their applications, according to Money Saving Expert. Even people with strong qualifications may find that not all lenders will approve their applications, and the deals they may be able to get from each of these financial institutions may vary significantly.
Where to begin
When trying to boost the quality of a mortgage application, however, would-be borrowers need to consider the role debt plays in their lives overall, the report said. The way people interact with debt – and the amount of it they carry at any given time – make up pretty much the entirety of many lenders' considerations, taking into account everything from credit scoring to verifiable debt-to-income ratios. That can even include some issues that might show up on a credit report but not directly on a credit score, such as a bankruptcy filing years in the past.
This means would-be buyers will likely have to reduce the number or value of their monthly debt payments to make sure they can qualify for a new mortgage, which would obviously increase their outstanding balances significantly.
Other things to keep in mind
In addition, when buyers are pre-approved for a mortgage, they can still face difficulty actually qualifying in certain instances because the closer they get to the maximum approved value, the more reticent lenders might be to actually extend them that much money, according to Credit.com. This is the case because when dealing with thin margins at the upper limits of a pre-approved mortgage, even small issues like minor fluctuations in outstanding debt can endanger the approval.
Along similar lines, borrowers should try to avoid running into issues with financial instability whenever possible, according to Zillow. While some financial emergencies may be unavoidable, lenders don't like to see consumers take out new lines of credit or quickly rack up more debt on existing accounts.
Of course, one of the best ways to have a mortgage application approved is for borrowers to come to the table with significant amounts of money in place for a down payment, the report said. When buyers can make down payments in excess of 20 percent, their chances of having their applications approved are likely to be strong.
Working with a financial professional or real estate agent to determine the best path forward on a home loan application is always a good idea, as is doing plenty of research beforehand. That way, shoppers won't run into any unexpected issues throughout the mortgage process.
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