When purchasing real estate in 2022; you must be prepared to move quickly. It’s a seller’s market, and that means there is a shortage of inventory, with a surplus of qualified buyers. Educate yourself on the best ways to get your mortgage loan approved with these quick tips.
Know Your Credit Standing
It only takes a few minutes to pull your credit report to establish your credit score, active trade lines and credit history. Credit scores and activity have a major impact on mortgage approvals; know that a low credit score can make getting a mortgage difficult, or impossible. Most lenders require a minimum credit score of 680, so if your score falls below, lenders can deny your request for a conventional mortgage loan. In addition to higher credit scores being more desirable to a lender, ensure that you pay your bills on time, keep your debts low, and avoid new loans.
Stash That Cash
If you’re considering applying for a home loan in the near future, be ready to show your savings. Mortgage lenders are cautious; the more you have saved, the better chance of approval on your application. Down payment minimums vary depending on various factors, such as the type of loan, the property type, and the financial institution. Each lender establishes its own criteria for down payment, but on average, you’ll need to show at least a 5% down payment, plus any additional closing costs saved. Aim for a higher down payment if you have the means, as a 20% down payment not only reduces your mortgage balance, but it also alleviates the need for high ratio mortgage insurance.
Maintain Steady Employment
Having tenure with your current employer until your mortgage funds is crucial as any changes to your employment or income status can stop or greatly delay the mortgage process.
Lenders approve your home loan based on the information provided in your application, so taking a new job or quitting your job to become self-employed can throw a wrench in the plans, leaving lenders to re-evaluate your finances to see if you still qualify for the loan.
Minimize Debt
You don’t necessarily need a zero balance on your credit cards to qualify for a mortgage loan - however, the less you owe your creditors, the better. Your debts determine not only if you can get a mortgage, but much you can qualify for. Lenders evaluate your debt-to-income ratio before approving your mortgage. Your combined monthly debt payments — including the mortgage and housing costs – shouldn’t exceed 44% of your gross monthly income. In addition, it’s imperative that you do not take on new debts during your mortgage application process as this could stop a lender from offering a final approval. Avoid any major purchases until after you’ve closed on the mortgage loan such as financing a new car, purchasing home appliances with your credit card, or co-signing someone else’s loan.
Getting pre-approved for a mortgage prior to shopping for homes is so important, so that you can have a clear picture on your existing credit, debt ratio and affordability. If you’re ready to get started on your mortgage pre-approval process, head over to my easy-to-use online application.
For further questions about your unique financial situation, do not hesitate to reach out to me anytime,
Chad Eliason⠀⠀⠀⠀⠀⠀⠀
📞 250.804.9874⠀⠀⠀⠀⠀⠀⠀
📧 info@chadeliason.ca⠀⠀⠀⠀⠀⠀⠀⠀
🌐 http://www.chadeliason.ca