If you have decided that you are ready to purchase a home, the next step is to convince a bank that you are ready to get approved for a home loan. To ensure our application for a mortgage is approved, there are specific steps you can take.
1. Keep Your Job
When it comes to purchasing a home, the bank will want to know that you have money coming in that will allow you to afford to pay the mortgage easily. That is why it is essential to stay with your employer as you go through the home buying process. If you are interested in purchasing a home, have steady and ongoing employment is essential to the approval process.
Even if you have another one lined up during the mortgage approval process, quitting your job could derail your approval. Therefore, it is best to stick with your current job during the mortgage approval process.
2. Reduce Old Debt
You don't need to be debt-free to purchase a home, but a lender will look carefully at your debt-to-income ratio. They will want to ensure that your monthly payment load for your debts isn't so high that it will get in the way of paying your mortgage.
That is why it can be smart to pay down some of your debt before applying for a home loan. First, start with high-interest debt, such as credit card debt. Lowering your balance on your credit cards can also significantly increase your credit score, so be smart about the debt that you pay off.
3. Avoid New Debt
When you apply for a home loan, you shouldn't add new debt to your credit report. Wait to open that credit card at the home goods store or the home improvement store until after you have closed on your home, the mortgage is approved, and you have the keys.
Even if you think you can easily handle the new debt and your mortgage, taking on new debt can bring down your credit score and make you look financially irresponsible in the lender's eyes. In addition, your lender will verify your credit score before they close on your loan; if you suddenly have new debt, that could derail your mortgage from closing, even if you are getting ready to come in and sign the paperwork.
If you are ready to purchase a home, you need to ensure your financial house is in order so you are approved for a home loan. You need to keep your job so you can show a steady income source. You need to pay down your debt so that your debt-to-income ratio isn't too high. You also need to avoid any new credit or hits for credit checks hitting your report before closing on the home loan. These three straightforward tips will help ensure you get the loan you need to purchase a home.