There are plenty of aspects that surround the home buying journey that are out of your control. One of the areas where you can actually influence the outcome with your mortgage lender is having a strong financial status. The more you can do to make yourself an attractive candidate for a loan, the better chance you have to get a lender to approve you – and these are things that can help you get the best rate, terms and assists with making you a preferred candidate.
So what do you need to make yourself attractive to potential lenders? Glad you asked! Here are a few things that help:
Do you have a steady employment history? Lenders like to work with people who have long-term and dependable streams of income, because it shows you have the backing you need to make your mortgage payments. Certainly some evolution in your career is necessary – say, from one job to another for a better position, or perhaps there were circumstances beyond your control that put you in a new job, such as your old company folded. Lenders will take these factors into consideration, but they mostly prefer to see someone who’s been in a long-term position – the longer, the better.
Do you have good credit? There are keys to leveraging your good credit for a home loan. Yes, we’re all human – we all make mistakes, we all go through rough spots. But what matters is how you manage them. If you’ve had some debt problems and managed to continue to have a good debt-to-income ratio, that will work in your favor. Of course, the higher your credit score, the better it is for you – but it also helps lenders to see that you’re consistently making your monthly payments and continue to manage your debts responsibly. If your score and report are lacking, take some time to improve your credit history by making timely payments, lowering your debt-to-income ratio, and don’t add any more debt – at least, not until after you buy your home.
Do you have a solid down payment? Having a down payment proves that you’re a serious buyer. While 20% is certainly the preferred amount, some lenders will accept as little as 3%. Typically, a down payment is anywhere from 5% to 10%. Remember that if you put down less than 20%, you’ll be required to purchase private mortgage insurance. If you have concerns about your down payment, talk with your lender about other financing options. There are certain types of loans that require a lower down payment, and there are programs available that offer down payment assistance.
Don’t be afraid to ask your lender for other ways to make yourself a more attractive candidate for a loan – they can help with tips and tricks that will put you in the right position to apply, and be accepted.