Lenders look at more than just your credit rating. They want to know that you have a steady income and are responsible with your money. As you consider buying a home, take some time to evaluate your financial situation before shopping lenders. Here are just a few key tips and tricks at ensuring you’re in the best position for mortgage approval:

  1. Stay at your present job. The bank will want to see, at minimum, your last two tax returns. If you want to buy a home this year, it’s not the time to start over in a new industry. If you are just getting started in the professional world, you may need to work a while longer in order to show a history of steady income.
  2. Put off buying a new car. Be careful about buying big-ticket items like a new car or boat or on credit until after you have closed on your home.
  3. Pay down credit debt. If you are carrying a balance on credit cards, work hard to pay those down or off. Try not to use credit cards if you can’t pay the balance off monthly.
  4. Pay your bills on time. Incurring late payments will reflect poorly on your credit report, so keep track of deadlines or set up automatic payments before they are due. 
  5. Save up cash for a down payment. You have a better chance of being approved for a lower amount, so try to save up for a down payment to reduce the loan amount.
  6. Don’t forget the closing costs. In addition to a down payment, lenders will also want to see that you have enough to cover potential closing costs, which in Ohio is an average 2-3% of what you pay for the home. For example, if you buy a home at $250,000, your closing costs could range from $5,000 to $7,500.
  7. Say no to cosigning for others. Now is not the time to cosign on any loans with family members or friends.
  8. Throw those credit card offers away. Each time you apply for credit, the provider will pull your credit history, which affects your score. 

If you’ve applied for a mortgage and didn’t qualify, make certain to clarify lender feedback. A rejection could be around something that is very easily resolved, like an inaccurate note on your credit report. And remember, not all lenders work the same; a savings and loan bank may consider lower credit scores and smaller down payments than a commercial bank. It’s important to shop around and find a lender that appreciates your unique situation and can coach you through the steps you may need to take in order to qualify.

I work with several lenders serving the Columbus area, each with their own unique loan programs and qualifying credit standards. For a list of recommended lending vendors, contact me and ask for my Buyer’s Guide.

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