Before you can jump right into the housing market and shop for your dream home, most people often have to sit down with a lender first and get approved for a mortgage. People hope to obtain the best mortgage rates that suit their financial situation, but not all meet the qualifications to get the longer end of the loan stick.
While it’s common knowledge that qualifying for a mortgage is tricky, there are many ways to ensure you’re moving forward on the right track. Brushing up on the basic qualifications lenders often refer to can already give you an edge, so here are some essential factors you need to consider to boost your chances of getting your ideal mortgage.
Factor #1: Credit Score
Your credit score will have the most impact on your mortgage rate, especially since it reveals your sense of financial responsibility. Lenders refer to your credit history to gauge the level of risk you represent, so the higher your score, the more likely you will get approval.
Scoring between 700 to 800 can put you at the best spot, but you’ll be viewed as “subprime” if you reach below 620. Lower scores will serve as a significant roadblock that can keep you from getting favorable terms, so it’s best to repair your credit long before applying for a loan.
Factor #2: Income and Employment History
Lenders also need to ensure you have a stable stream of income to ensure that you can meet monthly mortgage payments with little-to-no hiccups moving forward. You’ll get some plus points if you’ve been going steady with your current company, but you can boost your chances further if you have a high-paying income.
Factor #3: Debt-to-Income Ratio
A high-paying salary looks attractive at first glance, but when you factor in your debt-to-income ratio, it’ll uncover whether you can afford to loan on top of meeting other monthly obligations. A low debt-to-income ratio will always be better for lenders, though a ratio that exceeds 43 percent can start to look risky.
You can make up for it by having a high income and good credit score, though keep in mind that lenders may still view you as a high risk.
Factor #4: Liquid Assets
Many things can happen and put a wrench in your plans, so lenders need to protect themselves by ensuring you have enough liquid assets to help cover your monthly payments in case you run into a setback.
Your liquid assets should be enough to take the lead while trying to get back on your feet, so not having enough savings to back you up when the going gets tough means you may end up with higher interest rates.
The Bottom Line: Polishing Different Financial Factors to Increase Your Mortgage Approval Rate
Applying for a loan is often a droning process, but you can save yourself plenty of time and trouble by ensuring you meet the requirements long before you send in your application.
How Can We Help You?
Getting a mortgage is an inevitable reality for many people, but the process from getting pre-approved to locking in your rate can often feel like a waking nightmare. You don’t have to brace through this on your own, especially since our mortgage brokers at paloRATE can simplify your loan application process.
If you’re planning to apply for a home loan, check out our home loan rates. We strive to provide the best mortgage rates and minimize the hassles associated with securing a loan, so get in touch with us (206) 719-2694!