If you want to know how to get approved for a home loan, you've come to the right place. Nearly 48 percent of Americans doubt that they could qualify for mortgages. Nonetheless, it is estimated that lenders approve about seven out of 10 people who apply. Follow these steps if you'd like to join them:
1. Save up some money for a down payment.
Most people need at least 3.5 percent of a home's price, according to The Motley Fool. A 20 percent down payment will substantially reduce the loan's overall cost. Certain government programs can help, especially if you've served or are active in the military.
2. Request a free credit report and carefully review it.
This will help you identify ways to boost your credit score and the likelihood of approval. For example, you may discover harmful errors that you should report to a credit bureau.
3. Consider paying off some accounts before you apply for a mortgage.
Many lenders won't approve your application if you owe money to a collection agency. A high credit card balance can also reduce your score; you can try to settle at least part of it. Keep in mind this may hurt your credit score as well, so check into all options to see which will work best for you.
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4. Assemble the papers you need to verify your income and savings, such as tax returns.
Independent contractors may need their 1099-MISC forms. If you work for an employer, you should find your W-2 forms, paycheck stubs and a document indicating when the company hired you.
5. Select a lender that offers desirable mortgages before you schedule any real estate showings.
Rather than just comparing numbers, remember to consider factors like service, convenience, flexibility and familiarity.
6. After learning how to get approved for a home loan, ask the lender to prequalify you for a mortgage.
Staff members will make this decision by examining your financial documents and looking at a credit report. If the lender prequalifies you, it will estimate a maximum home price.
7. Browse real estate listings and find an appealing house that you can afford to buy, maintain, insure and cool.
Make a reasonable offer on the property. Sellers readily accept offers when they know that reputable lenders have prequalified buyer(s) for mortgages.
8. If a seller accepts the offer, the home buying contract goes into effect and your lender can approve the purchase.
This decision largely depends on the results of an appraisal. It's crucial to select a home that's truly worth more than the amount you need to borrow.
9. Be patient while mortgage underwriters assess the property and your application.
This may take a few weeks. In the meantime, avoid spending considerable amounts of money on credit. Put off any plans to apply for other loans or credit cards.
10. If the appraisal prevents a mortgage approval and the estimated value doesn't seem realistic, you can request an appraisal rebuttal.
Otherwise, you're probably ready to schedule a closing and start planning to move into your new home. Congratulations!
Ready to begin the pre-approval for a mortgage loan? Start here.
This article is intended to be a general resource only and is not intended to be nor does it constitute legal advice. Any recommendations are based on opinion only.
Rates, terms and conditions are subject to change and may vary based on creditworthiness, qualifications, and collateral conditions. All loans subject to approval.