Maximize Your Chances of Approval: 6 Pieces of Information to Include in Your Mortgage Application
Buying a home is an aspiration for many people, but getting approved for a mortgage can be daunting if you’re not well-prepared. Mortgage approval depends on several factors, including your credit score, employment history, income, and debt-to-income ratio. Therefore, you need to provide the lender with the right information to maximize your chances of approval.
Here are the six pieces of information you need to include in your mortgage application:
1. Credit Report:
Your credit report carries significant weight in a mortgage application as it shows your creditworthiness. A credit score above 700 is considered good, and anything above 750 is excellent. However, if your credit score is lower than 620, you may struggle to get approved. The lender will examine your payment history, credit utilization, the length of your credit history, and any negative marks, such as late payments, collections, or bankruptcies. So, before applying for a mortgage, obtain a copy of your credit report and review it for errors or discrepancies.
2. Income Verification:
Lenders need to know that you can afford the mortgage payments. Thus, you need to provide sufficient proof of your income, such as W-2 forms, pay stubs, tax returns, and bank statements. If you’re self-employed, the lender may require additional documents, such as profit and loss statements. Moreover, your income should be stable and predictable, so avoid switching jobs or careers during the loan process.
3. Asset Statement:
Lenders also want to know that you have enough funds to cover the down payment, closing costs, and reserves. Hence, you should provide an asset statement that shows your savings, investments, and retirement accounts. Keep in mind that some loans require a minimum down payment of 3% to 20% of the purchase price.
4. Debt Information:
Your debt-to-income ratio (DTI) is a crucial factor in mortgage approval. The DTI is the percentage of your monthly income that goes toward debt payments, including credit cards, car loans, student loans, and other mortgages. Typically, lenders prefer a DTI of 43% or lower, but some may accept up to 50%. Thus, you need to disclose all your debts and their minimum payments to the lender.
5. Employment History:
Lenders prefer borrowers who have a stable job history and a steady income. Thus, you should provide a detailed employment history that shows your current job title, employer, and length of service. If you’ve changed jobs recently, explain why and provide documentation to support your income.
6. Purpose of the Loan:
Finally, you need to specify the purpose of the loan, whether it’s for a purchase or a refinance. If you’re buying a home, provide the purchase contract, the property details, and the intended use, such as a primary residence or an investment property. If you’re refinancing, provide the current mortgage statement, the loan balance, and the intended use of the funds, such as debt consolidation or home improvement.
In conclusion, providing the right information in your mortgage application can increase your chances of approval and help you secure better loan terms. Be upfront and honest with the lender, and provide all the required documents and disclosures. Remember that a mortgage is a long-term commitment, so make sure you can afford it and that it aligns with your financial goals. Happy house-hunting!
