Buying a home is a major investment that will often require the use of a home mortgage loan. If you are looking to improve your chances of being approved for the home loan you need, the three tips outlined below can help.
Tip #1: Deposit Any Cash Savings You Have
Mortgage loans are designed to be paid back over an extended period of time. Consequently, the chances that your income situation will change during the time your home loan is active is rather high. That is why lenders want to know that you have some savings available that will allow you to make your mortgage payment in the short term even if you experience a loss of income. The more savings you have, the more willing lenders will be to approve your mortgage application. That is why it is always a good idea to deposit all of your savings in the bank prior to applying for a home loan. This includes any cash savings you may have stashed in your home or a safety deposit box.
Tip #2: Minimize Purchases Prior To Applying
Another factor lenders take into consideration when trying to determine your financial stability is your spending habits. Looking at your recent spending habits allows lenders to ensure you are not living outside of your means. This is very important since making large purchases can leave you with a significant amount of other debt that will need to be repaid in addition to your mortgage. In order to help demonstrate financial stability, you will want to minimize your purchases for at least a few months prior to applying for a mortgage loan. You will especially want to avoid large purchases or purchases that require you to take out a new line of credit.
Tip #3: Do Not Close Long-Standing Credit Accounts
Mortgage lenders want to make sure that you have experience when it comes to handling your finances responsibly. This is why they look at both your credit score and the length of your credit history. Since credit bureaus report the average age of your credit accounts, choosing to close any long-standing accounts can significantly shorten your credit history. Consequently, you will want to make sure that you leave your accounts in an active status even if you have brought the balance of these accounts down to a zero balance. If you are paying off an account that will automatically close once the balance has been paid, you may want to consider leaving a small balance on this account until after your application for a home loan has been approved.
Reach out to a company like The Florida Mortgage to learn more about home loans.