1- Essential Documents
When you apply for a mortgage, you’ll need to provide proof of your income. Most lenders usually request the standard package of material. That includes a month of recent pay stubs from any buyer or the buyer who will be listed on the loan and two years’ worth of tax fillings. You might also need to submit at least three months’ worth of tax fillings. Some lenders might also question you about some exceptionally large deposits or withdrawals. But all of this is a standard procedure and there’s nothing to be worried about.
2- Your Spending Limits
Most lenders use what is commonly called the 28/36 rule. This means that your monthly mortgage payment cannot exceed more than 28% of your gross income. Also, your revolving debt payments —including expenses like a potential mortgage, car loan, and any other payments that are received on a monthly basis, must account for no more than 36% of your gross income. This is not a hard and fast rule, but this can be used to figure out what your borrowing and spending limits will look like.
3- What Market You are Buying in
The type of loan also depends on the market you are buying in and as well as the type of house you are buying. Depending on which state you are in, the lender might have very strict standards for the type of loan he can offer you, or he might be extremely lenient. Most lenders might also go through your finances, as well as the finances of the place that you are buying, to make sure that everything checks out. Nonetheless, this might also include putting in 25% as a down payment.
4- Raise Your Credit Score
A credit score is the most important factor that dictates whether or not a lender would be willing to give you a loan. A credit score defines how good you are as a borrower of money. If you are good at returning the money you borrow and have an excellent credit score, you might not even have to submit the 25% down payment. On the other hand, a poor credit score might slim your chances of even getting a loan.
There are a few things that you can use to raise your credit score. Firstly, check your monthly credit reports and dispute any mistakes you find there. Paying any outstanding balance might also raise your credit score. But the golden rule is to never borrow money if you cannot repay it in time, as this will poorly reflect on your credit score.
