10 Valuable Tips To Consider When Appling For A Mortgage Loan

Lenders take into consideration several different factors when making a decision whether or not to offer you a loan/mortgage and at what percentage rate. Pay close attention to the 10 factors below to improve your standings and make sure not to do anything that will smudge your credit.

1. Credit Report - Get copies of your credit report from all three major credit bureaus and review them carefully. It is estimated that more than 40 percent of credit reports contain errors. Errors raise your rates and can stop you from getting a mortgage. Have any discrepancies reviewed and corrected.

2. Outstanding Credit - Pay off all credit cards and outstanding bills or carry very low balances before you apply for a loan/mortgage.

3. Credit Card Accounts – Do not apply for any new cards or close your current accounts if you know you are going to apply for a loan/mortgage. Doing so may make potential lenders suspicious.

4. Down Payment - The more you can put down up front, the lower the loan, and the more likely you are to be approved. If you have an excellent credit history, you're likely to be approved regardless of how much money you put down. If you have less than perfect credit, the amount of your down payment may mean the difference between rejection and approval.

5. Your Income - You will need to provide a consistent source of income, it is imperative that you do not quit or change jobs prior to applying for a loan/mortgage.

6. Interest Rates – The current interest rates will not determine whether or not you get a loan, but they will help determine your payments and how much you will have to pay each month. The review process and paperwork can take some time for the lender to process, and interest rates will continue to change during the process. If you think interest rates may rise during the process of your loan/mortgage review, then consider paying a "lock-in" fee so you are guaranteed you'll get a favorable rate.

7. Available Funds – Keep in mind that in addition to the down payment, you will also need to have funds available for closing costs and if necessary to pay for points. Don’t make any major purchases during this time that will risk depleting your available funds just prior to buying a home.

8. Debt-to-Income Ratio - A lender isn't likely to issue a loan/mortgage for a home you can't afford. Figure out your debt-to-income ratio so you have an accurate idea of how much you can afford to pay on a monthly basis.

9. Finding a Lender – All lenders are different. You should inquire as to how many mortgage applications they approve and disapprove. A warning sign is if the lender denies 20 percent of their applicants. Make it a priority to learn as much as possible about the history of the lending institution and about their reputation. You should also compare the loan/mortgage around between lenders.

10. Be Honest – Do not lie, hide, or try to alter information in hopes of increasing your chances of getting a loan. If you do you will risk being charged with fraud and may never find a lender who will work with you again.