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Want to Find the Right Home Loan? Here’s What You Can Do.

You’ve heard time and again that a pre-approval is an important step toward home ownership, and sometimes it can seem like the pre-approval process is beyond your control. Certainly there are aspects of it that are up to your mortgage lender to determine, but you have more capabilities than you think when it comes to influencing the outcome of the pre-approval process.

For starters, your credit score is an important tool throughout the entirety of your home buying journey, and the pre-approval is your first opportunity to help you land the house of your dreams. Before you start working with your lender on your pre-approval, it’s important to get a copy of your credit report – not just to see what your score is, but also to make sure there are no mistakes on your report, which can lower your score. If you find any mistakes, report them to make sure they’re removed in time for your pre-approval (blemishes can take up to 30 days to be removed from your report).

Another step you may want to consider is knocking out as much debt as you can before you start your pre-approval process. Your credit score is affected by your debt, the amount of revolving accounts you have, and the timeliness of your payments. Do what you can to reduce the amount of revolving debt you have on your score. And if you can’t? At least ensure that your payments are made in a timely manner, ensuring that you show yourself to be responsible with managing the credit you’ve been given.

It’s also important to make sure you have a work history for two years or longer. This helps show lenders that you’re stable and have a reliable form of income, which signals to them that you’re a favorable candidate for a loan. If you’ve recently changed jobs, most lenders require that you’ve been employed in your current job for six months or more and provide documentation supporting prior employment in the same or related field, showing a two year work history. And if you’ve been thinking of making a job switch, consider hanging on! You may want to wait until after you’ve locked down your new home, and then make the switch.

Lastly, here are some tips for building up your finances in advance to finding your loan. Using a mortgage calculator, get a good idea of what you’ll be able to afford for a monthly payment, then bank at least three months’ worth of that number or show you have other assets, such as Investment accounts or Retirement accounts, so your lender can see that you’ve prepared a financial cushion. In some cases you can borrow money from a friend or family member, but your lender will also want to see bank statements that support your financial capability to handle your mortgage, so keep that in mind as you’re preparing for your application. You may also be able to find someone to act as a co-borrower. If they have better credit than yours, they could be very helpful in assisting you in the pre-approval process.

The more you can do to get your finances in shape, the better shape you’ll be in when it comes time to get your pre-approval. Follow these simple steps, and before you know it, you’ll be past the first hurdle on your journey to home ownership!

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