Are you considering purchasing your first home? You will most likely need to apply for a mortgage, so here are some tips to prepare you for a mortgage application:
Pay Off as much Debt as Possible First
When mortgage lenders look into your finances, it benefits you to keep your debt-to-income ratio as low as possible. Any debt, including credit card debt, student loan debt, and car payments can affect how much you are allowed to borrow for your mortgage. In fact, if your total debt combined with mortgage payments is greater than 43 percent of your income, you may not be able to receive a loan.
Pay Your Current Bills Regularly and On Time
Are you forgetful about paying your bills on time, or worse, have you actually missed bill payments? This can affect your credit in a negative way, which could make obtaining a mortgage difficult or even impossible.
Have a Great Work History
In most cases, you will need to have worked at the same place for at least two years in order to obtain a mortgage. However, if you just completed graduate school and have a great job, you might be exempt from this rule.
Refrain from Buying on Credit
While your mortgage is impending, make sure not to buy anything on credit or even apply for any lines of credit. Doing so may jeopardize your mortgage.
The Process is More Complicated for Self-Employed Individuals
If you own a small business, it may be two years before you even qualify for a mortgage. If you are self-employed, make sure that you write off all your expenses strategically on your taxes, because it could make your adjusted gross income lower than your actual income. In this case, the lender considers the lower amount to be your income.
Are you ready to buy a home? Our mortgage brokers can help you find the best mortgage loan rates! Contact our mortgage loan company today for a free consultation!