How to increase your chance of getting mortgage loan
Are you planning to apply for mortgage loan? If yes, you may need to start planning ahead before you apply for the loan. Knowing what lenders want and ensuring that you meet the requirements will in no small way increase your chance of getting the loan. Although there are other types of mortgage loans such as VA loans and FHA loans, this article will focus on conventional mortgage loan. If you don’t want your mortgage loan application to be rejected, it is important that you put some things in order first before applying for the loan. Just like any student that plans to pass his examinations will not wait for the examination dates before he starts to read, in the same way, you don’t need to wait for the time you actually ready to apply for mortgage loan before you start putting things in order. Here, I will discuss three vital points.
Credit Score
If you want to apply for conventional mortgage, you will need to build or improve your credit score. Credit score is one of the important factors that lenders consider while assessing the creditworthiness of any borrower. If you have very good or excellent credit score, you stand the chance of having your mortgage loan application approved. On the other hand, if your credit score is bad, you may find it difficult getting a lender that will grant you the loan. The reason is that, if your credit score is good or excellent, it is a reflection of good credit history. The lenders believe that you may not have problem paying back the mortgage if you are granted. But if your credit score is bad, it is the opinion of lenders that you may likely default in paying back the mortgage loan. And no lenders will be willing to grant loan to a person who will not be able to pay back their money. So, if you know that your credit score is bad or not so good, it is better not to apply for any conventional mortgage. You need to ensure that you improve your credit score first. Even, if any lender considers your application at all, you may be charged a very high interest rate.
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Down Payment
Traditionally, lenders will expect that you make sizable down payment towards the mortgage loan you are applying for. Down payment is the amount you need to pay as your own equity contribution towards the cash value of the property you want to buy. This is always expressed as a percentage of the value of the property. The down payment that lenders will request from you may vary among lenders. The factors that determines the down payment you will be asked to pay may be influenced by the type of mortgage loan you want to take, the amount involved and your credit score. If you plan to apply for conventional mortgage loan, the minimum down payment that will be expected from you is 20%. Otherwise, you will need to take Private Mortgage Insurance (PMI). This will add to the cost of the mortgage. If you want to increase your chance of getting your mortgage loan application approved, you can offer to pay hefty down payment. Even if your credit score is not that good, lenders can still consider your application. The fact that you are making a very high down payment, it means that the mortgage loan you will apply for will not be too much again. This will make it easy for you to repay the loan. And this reduces the risks that the lender will take if you are granted the mortgage loan.
Employment
Apart from making the initial down payment, lenders will want to be convinced that you will be able to make your monthly repayment without any default. For this reason, they will expect that you have stable employment. You will need to provide information about your employer and your pay slip for the past six months minimum. Also, they will expect that you have been in the same employment for some considerable length of period say like two or three years. So, if you are not having a stable employment or if you just get a new job or change employment, you may not apply for mortgage loan yet.
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Conclusion
If your credit score is very good; you have a stable job and you are able to make sizable down payment, you stand a better chance that your mortgage loan application will be approved.