4 tips to help you get the mortgage
If you’re preparing to buy a house, applying for a mortgage can be a difficult and stressful experience. However, there are a number of ways that can make applying and being approved for a mortgage easier. The following four tips will help you get the mortgage so you can start looking for your dream home.
- Know your credit score. While a number of factors are considered along with your mortgage application, your credit score might be the most important. To avoid an unexpected or unwelcome surprise, check your credit score several months before you begin applying for mortgages. Contrary to popular belief, checking your own credit score does not negatively affect your overall score. Likewise, checking your credit score in advance can give you time to fix any errors that may occur on your credit report.
- Pay down existing debt. Debt of any kind, whether from car payments, student loans, or credit cards, can negatively affect your ability to get a mortgage. Start putting as much money as you can towards your debt, paying off loans or outstanding balances with the highest interest rates first. Even if there is no way you will be able to pay off your debt completely, making consistent payments will reflect positively on your credit report. Likewise, the months before applying for a mortgage is not the time to take on new debt. Avoid major purchases that would require taking out a loan or payment plan until after you’ve purchased your new home.
- Stay at your job. Your potential earnings – and therefore your ability to pay the mortgage each month – will be heavily considered as part of your mortgage application. Because of this, changing jobs just before or in the middle of the application process may show an inconsistent earning history, making you a poor candidate for a mortgage. Staying with your current employer gives you the ability to show several months of consistent pay stubs; if you do change jobs or become self-employed, it may be in your best interest to wait until you can again show consistent earnings before reapplying for a mortgage.
- Save as much cash as you can. To avoid paying for costly private mortgage insurance (PMI) – or getting your mortgage denied completely – save as much cash as possible for your down payment. Most banks will require at least 20% of the cost of the home as a down payment to avoid PMI. Having enough cash to place a significant down payment may also help you get a lower interest rate. You may also need enough cash to cover your share of the closing costs, which often run between 3-5% of the total mortgage amount.