5 Steps to Prepare for Getting Your Mortgage Application Approved
For many, the home buying process starts with screening local listings, checking out different Maine neighborhoods, and visiting open houses. While it’s a great idea to get a sense of your local market when you’re thinking about buying a home, there are a number of other necessary steps you should take early on to prepare for the mortgage application approval process when your dream house comes along.
1. Check Your Credit Report
As soon as you begin thinking about buying a home, you’ll want to check your credit score. This score is one of the most important factors that is considered when applying for a home loan, so seeing where you stand and identifying any opportunities for improvement early on is a must.
Visit annualcreditreport.com to check your credit report for free once per year. Take a thorough look through your report to be sure there are no unexpected surprises. For starters, make sure that there’s nothing that seems totally unfamiliar. Unfortunately, it is possible to fall victim to identity theft, and unknown accounts are a good indicator that your personal information may have been compromised.
Once you’ve confirmed that everything listed is accurate, see if there’s anything on the report that might hinder your mortgage application. This would include things like accounts that you’ve neglected to pay, cases of bankruptcy, or excessive credit inquiries. By checking your credit report early on, you’ll give yourself more time to work on improving your credit score before submitting your mortgage application for approval.
2. Improve Your Credit Score
In addition to becoming familiar with your credit report, you’ll want to know your FICO credit score. You may easily have access to this as many credit card providers share this information with customers for free. If not, there are websites like creditkarma.com that can tell you your score.
Your credit score doesn’t need to be perfect to get approved for a mortgage loan, but a higher credit score usually correlates to a more affordable loan. Many lenders are looking for a minimum credit score of 620 to 640, to give you a sense of where you might stand comparatively. If your score could use improvement, starting on the process now will give you more time to bring it to a place you’re more comfortable with.
To best improve your credit score, you should know the factors that are taken into consideration when calculating it. Your payment history and amounts owed are the biggest ones, accounting for 35% and 30% of your total score, respectively. Just a single missed payment can negatively impact your score, so be sure to pay all of your bills on time and pay off your expenses in full whenever you can to keep your usage of available credit low.
3. Reach Out to A Mortgage Lender
There’s so much more that goes into buying a home than just finding the perfect place. When you’re ready to start looking for your new home, reach out to your mortgage lender early on in the process. A lender can walk you through the basics, such as discussing the different types of mortgages that are available, as well as help you calculate how much home you can afford.
In a competitive market like the one we’ve been experiencing over the past few years in Southern Maine, working with a local lender can give you a leg up. We’ve seen firsthand that when there are multiple offers on the table, some sellers may prioritize buyers that are working with a local mortgage company. They recognize that if any hiccups occur along the way, a local, in-person lender representative will be better prepared than an online provider to help smooth things out quickly.
4. Consider Getting Pre-Approved
Another great way to stand out from the crowd is by going through the pre-approval process with your lender. Pre-approval essentially gives you the green light to move forward with the home buying process by learning how much of a loan you’ve been approved for and assures sellers that you already have your financing worked out. In short, sellers don’t have to worry about accepting an offer from someone who may or may not be approved for the amount they’ve offered and the subsequent hassle that would result from this kind of hold up.
If you’re ready to find out exactly how much home you can afford, you can get your free pre-approval letter and lock in a low interest rate today.
5. Avoid Large Expenses and Big Life Changes
Even if you’ve been pre-approved, there are certain things that might jeopardize your mortgage before your closing date if you’re not careful. Lenders will check your credit score a second time, right before your closing, to ensure that nothing has changed. Leading up to your closing date, refrain from doing anything that might impact your credit score. This includes opening or closing lines of credit, making large purchases, or neglecting important bills like your rent payment. You also want to avoid things like switching jobs, which can be a red flag to lenders who are looking for stability (though not a deal breaker, especially if you’ll be earning more money). It can be easy to get caught up in the excitement of the process, but be sure that no unexpected hiccups put your mortgage approval at risk at the last minute.
Follow these tips to have a successful mortgage application process – from start to finish! Acadia Lending Group is here to help walk you through the entire process. Just give us a call to speak to one of our expert loan officers. 207-899-4500.