When you apply for a mortgage, the lender will weigh many factors before making a decision. These factors determine which types of loan you qualify for and what the interest rate and terms will be.
Knowing the factors considered by the lender, and taking steps to improve your scenario ahead of time can make a tremendous difference in the processing of your loan. Preparation can literally make all the difference in the world.
Some of the basic factors apply for just about any type of loan but are especially important if you are trying to get a mortgage. The key factor is, of course, credit.
How good is your credit? Get copies of all of your credit reports from the 3 major consumer reporting companies and check each one for errors. These are available on the annualcreditreport.com website for free.
Credit reports frequently have errors which need to be corrected. It is possible to get them corrected at the source by challenging incorrect information. This will improve your credit score. Pay off all credit balances but don’t close any accounts.
The size of your down payment can make a huge difference in your chances of being approved. If you have credit problems, the bigger the down payment, the less impact from your credit score.
If you have great credit, you can still obtain better mortgage terms by increasing your down payment
Most importantly, don’t lie to your lender. Do not misrepresent your job or credit history in any way. All this information will be confirmed during mortgage processing. If there is anything you expect might be a problem, your mortgage originator needs to know right away. Your loan officer is there to help you.