In any given year, people sell and buy millions of homes. 2021 alone saw over 6 million sales of existing homes.
While buying a home is generally an exciting and sometimes stressful time, it’s not something most people do casually. A major reason for that is most people must get approved for a mortgage to complete the transaction.
With the average home price hovering around $350,000, financing is often the only viable path to home ownership. Of course, mortgage approval is something of an art in itself. If you’re considering a home purchase, keep reading for four tips to help you qualify for a mortgage.
1. Polish Up Your Credit Score
Boosting your credit score is one of the most important steps you can take to improve your odds of getting a home loan. After all, lenders will go straight to your credit score and credit report as part of their approval process.
The good news is that, if you start early, there is a lot you can do to improve your score. Some options include:
- Pay your bills on time
- Reduce your debt
- Lower your credit utilization
- Avoid hard inquiries
Over the course of a year, all of these activities will help improve your score.
2. Save for a Down Payment
More than ever, lenders want borrowers to have some skin in the game. They accomplish this by requiring that borrowers put a down payment on a home purchase.
The amounts vary by lender and loan type, but you’re always safe aiming for 20 percent. It saves you some money in the long run and may even get you some benefits. For example, you may secure a better interest rate from the lender.
That said, lenders will routinely accept anywhere between 10 percent and 20 percent.
3. Get Your Paperwork in Order
Most people do a preapproval process for their mortgage, but you can do yourself a favor even there by getting your paperwork in order. In general, you’ll need the following:
- Tax returns
- Proof of income
- Bank statements
- Investment statements
- Photo ID
Prepping these things in advance will save you time during the application if nothing else. Feeling hazy about the whole process? You can head over here for more about home loan process.
4. Pick a Property You Can Afford
One benefit of mortgage preapproval is that you go into the home-buying process with a clear picture of how much you have available. That lets you pick a property you can afford, rather than a dream home that stretches your finances to the limit.
You Can Get Approved for a Mortgage
The mortgage process often leaves people feeling unsettled, but you can get approved for a mortgage if you approach it correctly. Get an early start by getting your credit score up and saving for a down payment.
Get your paperwork in order before you even look at mortgage preapproval. Once you get preapproval, look for a property that is within your means.
Looking for more personal finance tips? Check out the posts over in our Finance section.
