Planning for a Bright, Financial Future

Do you need to secure financing for your upcoming home purchase, and you're worried about being approved? There are a few ways that you can make the odds more in your favor when it comes to having a mortgage approved by a local lender. Make sure to follow these tips for success. 

Fix Your Credit Score

It's worth getting a credit report to see what your credit score actually is. This will allow you to take steps to improve your credit score to appear as a more trustworthy lender that pays back their debts. You'll want to find ways to remove debts on your credit report, lower your total credit utilization, and clear up errors that you may see. For example, you may have paid off a debt and noticed that it is still on your credit report.

Save For A Large Down Payment

A large down payment is going to lower the loan amount and make your loan less risky to the local lender. In addition, a large down payment shows that you are responsible with money and capable of saving. While there are minimum down payments for each type of loan, you generally don't need to save up more than 20% of the home's price for a down payment. That is when you start seeing benefits, such as not having to pay private mortgage insurance and lower rates. 

Get A Mortgage Pre-Approval 

A mortgage pre-approval involves meeting with a lender and providing them with some basic information about your finances. This includes your income, debts, and assets that you have. There is not a formal check on the information during a pre-approval, but it gets you started with your relationship with a lender and lets you know how much money you can potentially borrow. 

The process of working with a lender can also let you know what potential problems they foresee with getting a loan. This can help you get ahead of those issues by the time you are ready to move forward.

Avoid Making Major Purchases

As tempting as it may be to start buying all of the things that you need for your new home before you close on the property, know that your lender is going to pull your credit report again before the paperwork is signed. If they see you taking on a lot of credit card debt, opening new lines of credit, and things of that nature, it's possible that they'll decline the mortgage because of the odd spending behavior. In some situations, additional debt can also increase your debt-to-income ratio and cause your loan to be denied.  

For more information, contact a local lender like Bellco Credit Union.