3 Hints for Getting Approved for a Mortgage

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Filed under: Qualifying for a Mortgage Loan

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When you are excited about buying a new home, it can be a disappointing experience to run into difficulties with the mortgage approval. The only thing that is lying between you and your dream home is the financing!

Don’t worry though… just because you have a hard time with approval from one mortgage lender, doesn’t mean that it isn’t possible to get the financing that you need. A conversation with another lender might help you qualify for the loan.

Here are three main reasons that you might have difficulty qualifying for a mortgage:

1. Debt-to-Income Ratio

Lenders will look at the ratio between what you earn monthly and the payments you have to make on all of your debts each month.  The minimum monthly payments due on your credit card, car, student loans, department store cards, and any other payments showing on your credit report will be added to your projected payments on the new house for the loan, taxes, and insurance.  So if you here a lender tell you that your “Ratios are too high” this simply means that you have too many monthly obligations in comparison to your monthly income.

Paying down the balances on your credit cards or sometimes refinancing your car are ways to lower debt ratios and get qualified for the loan you want.

2. Low Credit Score

Many households are carrying quite a bit of consumer credit card debt, which can have a negative impact on their credit scores. Additionally, late payments or missed payments can also have an impact to pull down a credit score.  If you have prior collections or judgements showing on your credit report, this will also bring your score down.

Step one is to talk with an experienced loan officer before you do anything else.  Allow them to look at your credit report and give you an idea of what might be causing a low score.  From there, they can guide you to the proper course of action.

3. No Down Payment

Most mortgage lenders prefer that home buyers have at least 20% down for the home that they would like to buy.  However, there are options for smaller down payments, which is why you need to explore the various loan programs available.  There are options from the VA (Veterans Administration) and federally insured mortgages from FHA that allow you to purchase with little or no down payment.  Not all lenders offer these types of loans so it pays to ask a few questions and talk to several lenders if the first lender rejects your application on the basis of down payment.

Some loan programs might allow a 5-10% down payment but keep in mind that anything less than 20% down could require mortgage insurance which will increase your monthly payments.  There are also ways for you to tap into retirement accounts and life insurance policies for the needed funds to buy a home.  Again, talking with an experienced mortgage professional can often reveal strategies that you did not know were available.

If you have further questions or would like to explore your options for home financing, feel free to give me a call.  I’m here to help!

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