One of the essential things to take care of when buying a house is to get your mortgage approved. Luckily, the process is straightforward. Applying for a mortgage can be daunting, especially if you purchase a property for the first time.
The good news is we have got you covered. This blog will cover some tips on how you can get your mortgage approved! So, keep reading to find out!
Tips on Getting Your Mortgage Approved
While there are different eligible criteria for different types of loans and lenders, here are some of the most common things lenders look for when you apply for a mortgage:
1. Credit Score
Your credit score is one of the essential things you consider when applying for a mortgage. To be eligible for a conventional loan, your credit score should be at least 620. You can attain your credit score from your credit card issuer—the higher your credit score, the higher your chances of affording the loan and getting approval.
You can improve your credit score by ensuring you don’t have any remaining debt payments. Moreover, you must also avoid making big purchases on credit before applying for a mortgage, as doing so will open a new line of credit, lower your score and negatively impact the length of your credit history.
2. Debt-to-income (DTI) Ratio
Before purchasing a home, you need to assess what you can afford and what is out of budget. A debt-to-income (DTI) ratio can help you assess affordability with the 28/336 rule. For instance, if your debt-to-income ratio is 50%, you spend 50% of your pre-tax income to repay debts.
To get a mortgage approval, your debt-to-income ratio should be lower than 28%, and your back-end ratio should be lower than 43%. The ideal percentage for the back-end ratio is 36%.
3. Proof of Income
You will also need to provide documents verifying your income to get mortgage approval. If you are self-employed, lenders will ask for your profit and loss statements to verify your income. Moreover, you will also need to provide a copy of your recent W-2 forms and tax returns for the past two years.
4. Proof of Assets
Apart from providing proof of income, any additional assets you own can also help you get approval for the mortgage. You must provide bank statements for your accounts from the past two months.
5. Liabilities
Lenders also require a list of liabilities before approving your mortgage. You may be required to provide documentation related to a prior loan, like housing or student loans. In addition, you may have to provide documents showing your credit card balances and outstanding debts.
Wrapping Up
Securing a mortgage is one of the essential steps in buying a home. You can hire a qualified Orlando realtor to help you in the process. If you are planning to buy a home, visit the Megan Dowdy Realty website. They have a team of experts who will take care of everything. For more information, call 407-509-9279.
