Many people think getting a mortgage approval is a difficult and stressful process. Since a mortgage is often the biggest financial obligation someone has, it’s no wonder qualifying for one requires some work. Between the mounds of paperwork and the waiting time involved as approvals are processed, it’s normal to feel anxious and stressed. However, there are steps you can take before you apply that can make getting a mortgage approval easier.
As a mortgage banker who has helped thousands of people through the home-buying process, here are my top tips to fast-track your mortgage approval.
1. Check Your Credit
Your credit score is vital to any type of lending decision, particularly a mortgage. Realize, though, that this does not mean you must have perfect credit. However, the higher your credit score, the lower your interest rate will likely be. When you check your credit, you can often find an estimation of your score through your bank, your credit card issuer, or even via online credit monitoring sites. But your score is only half the equation. You’ll also want an actual copy of your credit report from each of the three credit reporting agencies: Experian, Equifax, and TransUnion. Review each agency’s report for accuracy. If something doesn’t seem right, get it fixed before you apply for a mortgage.
2. Save for a Down Payment
Almost all mortgages require a down payment. The exact amount can range anywhere from 5% to 20% depending on the loan type. Realize that if you put less than 20% down, your mortgage lender will require you to carry PMI (Private Mortgage Insurance). The cost of PMI varies, but it’s usually around one half of 1% of the loan amount. So if you can avoid it, you should. You may be able to remove it later once your loan balance is paid down enough so that you have at least 20% equity. You’ll need to talk to your lender for specifics regarding this option.
3. Build a Nest Egg
In addition to saving for a down payment, you’ll also want some extra cash on hand. Most lenders prefer to see that you have a couple of months of mortgage payments in reserve. No mortgage lender wants to think you’ll be living paycheck to paycheck with nothing saves for emergencies. One appliance repair shouldn’t impede on your ability to make your mortgage payment. Additionally, the greater your reserves, the more that can help make up for less than perfect credit history.
4. Be Realistic About What You Can Afford
We all want our dream home now. But depending on your circumstances, that dream home may have to wait a few years. Be honest about what you can really afford. What kind of monthly payment can you comfortably carry? Remember that your mortgage amount may also need to include PMI, homeowner’s insurance, and property taxes. Calculate all this into your equation. Also look at your debt to income ratio, or DTI. This is the amount of monthly debt payments you have compared to your monthly income. Most mortgages will allow a maximum DTI of 41%. Ideally your DTI should be no higher than 36%. If your DTI is too high, or if you bite off more than you can chew in terms of a monthly payment, you’ll be more likely to miss mortgage payments if an emergency arises.
5. Get Your Documents Ready
Getting a mortgage requires a lot of paperwork and documentation. If you come to your lender with all the documents they are likely to need, you can make the process of getting a mortgage faster and less stressful. Here are the most common documents you’ll need to have ready.
General:
- Driver’s Licenses for all applicants
- Social Security Card (only on FHA and VA)
- Resident Alien Card or VISA – when applicable
Income:
- Most recent 30 days of pay stubs with year-to-date totals
- W-2 forms and/or 1099s (past 2 years)
- Verification of other income such as social security (provide award letter for current year), alimony, or child support (provide divorce decree)
- Most current 2 years tax returns (Federal only including all schedules)
- Partnerships, S-Corp, and/or Corporate Federal returns for the previous 2 years including all schedules and K1s
- If you have rental property income: Copies of all lease/rental agreements
Assets:
- Most recent 2 months (60 days) actual bank statements. Include all pages for both checking and savings accounts.
- Most recent 2 months retirement and investment account statements. Include all pages.
- Source of any non-direct deposit(s) that are greater than 50% of your monthly income.
- Proof of where the earnest money funds will originate. Lenders need proof that the earnest money has cleared your account.
- If you are receiving gift money for this transaction, additional documentation may be required.
Properties Owned:
- Copy of current mortgage statement on all properties owned
- Property tax information on all properties
- Insurance Declarations page on all properties
Other:
- Bankruptcy – Copy of discharge and schedule of creditors
- Divorced? – If so please provide your Divorce Decree if less than 18 years ago
- VA only – Copy of Form DD214
- Self Employed – Copy of current business license
You Can Get an Easy Mortgage Approval
Remember that you’re never alone when getting your mortgage. Both your mortgage banker and real estate agent can help guide you through the process to make it easier. So while getting a mortgage can be a big undertaking, it doesn’t have to be a stressful or difficult process. By doing some financial pre-planning, you can get approved and reap the rewards of home ownership.
When you’re ready to apply for a mortgage or refinance an existing one, contact us at 707-254-8891 or [email protected]. We can also direct you to the perfect real estate agent to help you.
Have Questions, Reach out to me for more information.
Call me at (707) 254-8891
Hilda Hensley Branch Manager – Mortgage Advisor
NMLS id 280206
Benchmark Mortgage
Ark-La-Tex Financial Services, LLC NMLS id 2143
