How To Get Approved For Your First Mortgage

The COVID-19 pandemic created lots of uncertainties, especially in the finance industry. And because of those uncertainties, most lenders have tightened their credit standards, making it difficult for people to access their first mortgage. But is there a way to get your first mortgage approved by McGowan Mortgages without having to for too long? The answer is yes.

Here are several things you need to make sure you successfully get approved for your first home mortgage with a great lender.

Check Your Credit Score

If you are waiting to apply for a mortgage to check your credit, there is a high likelihood that you will wait for a long time. Your credit score plays a significant role in your getting a mortgage. It allows lenders to rate your borrowing. Lenders also want sufficient evidence that you can repay your loans and pay bills, which your credit score offers.

A good credit score reassures lenders that you can repay a large amount of money they give you. If you have a credit score below 580, you may not qualify for a mortgage. So, before you start hunting for a mortgage plan, you need to look at your credit report and check if there is any incorrect information that may be bringing your score down.

Cleaning your credit report allows you to present yourself as a solid borrower. It can also mean a lower mortgage rate. Checking your credit score before filing for a mortgage gives you sufficient time to reverse your credit issues. But how do you change your credit score from worse to better:

• Pay every bill on time
• Do not close or open a credit account. Wait until after you close one to open another.
• Have a 30% or lower credit limit on your credit card balance. If your credit card limit is above 30%, you are hurting your credit score

Apply for a Mortgage with Multiple Lenders

Every first-time home buyer should never forget the first rule of thumb, never to accept the first quote you get from a lender. Most first-timers don’t know that mortgage rates aren’t permanent. Lenders have lots of flexibility with the fees and interest rates they offer clients.

So, for you to get those low mortgage rates, you need to shop around from different lenders and receive different quotes. And if you do get a lower quote from one lender, you can use that as a bargaining chip with other lenders. Shopping around also lets you know if you are getting an excellent deal or being sold out.

When comparing one lender with another, try to get an official loan estimate that details the rates, terms, points, and fees for each loan.

Calculate the Amount You Can Afford

We all have a dream home, but the reality is most of us can’t afford to purchase that home. Most people often assume that getting a mortgage is a one-way ticket to finally buying their dream home, which isn’t true. It would help if you were also afforded to pay the mortgage. This is why it’s important to calculate how much you can afford to own the house.

You can do this by using the 28/36 rule, also referred to as the debt-to-income ratio. If your DTI- debt-to-income ratio is 50%, you spend half of your pre-tax income paying debts. Ideally, your DTI for mortgage-related expenses should be below 28%.

If it is higher, you might need to work on eliminating or reducing some existing debt before applying for a mortgage.

Get Your Paperwork Together

Now that your finances are in order, the next step to ensuring your mortgage is approved is getting the necessary paperwork together. Lenders will require documentation for the mortgage approval process. Here are the documents you must have before applying for a home loan.

Income Verification: This document shows that you have an income and can make mortgage payments. If you receive any form of income from child support or alimony, lenders will need to see court orders, legal documentation, and bank statements. You will also need to provide your W-2 forms, as the lenders will want to see your tax returns.

Proof of Assets: Apart from an income, you also need to show proof of assets to secure a home loan. You should provide retirement accounts, bank statements, and brokerage accounts.

Other documents you will need to provide include a list of liabilities and other documentation your lender may require.

Remember getting your first mortgage approval isn’t easy. But, with the above tips, you can make strides toward getting your home loan approved.