Nothing is more frustrating than getting a rejection on your mortgage application. It can instantly ruin your home buying plans. This is why you need to be careful about the steps and decision you’re making upon application.
Having that said, there are things you must remember when you apply for one. By knowing these, you will not increase the chances of approval, but also get the best mortgage rates in Utah. You’re probably dying to know what these steps are, so without further ado here are they.
1. Assess your income.
Most lenders have a minimum income requirement. Right before you file or submit anything, it’s necessary that you research about it. They do this find out the financial capability of the borrower.
It serves as an assessment of how much can you afford once you start with the repayment of your loan. There are also lenders who ask about the household’s total income and expenses. This is to help them analyze the eligible amount you can borrow.
2. Review your outstanding debts.
When applying for a mortgage, it’s important that you compute for your debt-to-income ratio. This formula provides a side-by-side comparison of how much you currently owe versus your total earnings every month.
In simpler terms, this is the amount of gross monthly income that goes toward your monthly expenses. This may include your existing loans, credit cards, rents, bills, and other related payables.
If you have higher DTI, lenders may take this as a risky move to approve your loan. So if you want to have a better chance, try to pay off some of your obligations. As much as possible keep your DTI percentage at no higher than 36%.
3. Be clear about your reason.
Another important thing you need to do is to clarify your purpose as to why you apply for a loan. Is it to finance a new home, fund a renovation project or consolidate an existing debt? You need to be clear about the purpose of your application.
It’s necessary to identify these things to match with the lender’s requirements. You have to be consistent on setting your lender’s expectation. This is to give them an assurance on the money you’re borrowing from them. If you can’t align your purpose properly, then the chance of approval is low.
4. Fix your credit standing.
A majority of lenders refer to the borrower’s credit score. They usually look at this first to determine how good of a payer you are. That’s why you need to know where you stand when it comes to your credit history.
You need to find out whether your score can make lenders trust you enough. The good news is, not every lending company think highly of credit score. But, giving them a copy of this information can be helpful to you.
Before applying for anything, be sure you meet all the basic requirements this transaction require. From the minimum monthly to the necessary documents, you must ensure you prepare everything. This way you can increase the chances of approval on the mortgage you’re applying for.
If you want further assistance, talking to an expert can give you insights. So feel free to discuss them to a broker to help handle and assess all these things.