Factors That Affect Mortgage Application

If you are planning to purchase real estate, you will need to apply for a mortgage. Applying for a mortgage, however, is not as easy as getting a credit card or a personal loan. This loan involves a great amount of money; thus, you will be undertaking a very huge investment. For this reason, you must educate yourself about the factors that might affect your mortgage application and approval. If your application is denied, you might need to kiss your dream house goodbye.

There are various factors that might affect your mortgage application. For instance, lenders are more likely to approve an application from someone who is credit worthy, and has the ability to repay the debt. If you are applying for a mortgage, you must consider these factors to ensure loan approval.

Credit Report

Credit is a crucial factor considered by many lenders. This basically means that you must have a good credit score to qualify for a mortgage. If you have a bad score, you will only have sub-prime options which are very costly and have higher interest rates. With that said, before you apply for a loan, you must first know your credit score. This will provide you with enough time to repair any problems with your credit report. If you have a low score, taking a few months to fix it will make a huge difference. Here are a few tips to help you get a better rating:

• Lower your debt-to-limit ratio
• Pay everything on time
• Do not acquire an additional loan if you are planning to apply for a mortgage
  

Credit Cards And Outstanding Debts

In relation to getting a good credit score, you must be industrious in paying your credit card bills and avoid using them excessively during the months prior to applying for a mortgage. Any excessive activity on your credit report might mean irresponsible spending, and this may lead to a denial of your application. As an added tip, avoid canceling more than one account at a time and do not apply for several credit cards.

In addition, you must also make sure that you don't have thousands of dollars worth of outstanding debts since this can also lead to a denial. Lenders are cautious of extending debt to people who already owe so much. For this reason, you must pay off as many debts as you can before applying for a loan.

Employment

Another factor that must be taken into account is your employment history. If you have a strong employment history that shows your financial stability, you will help lenders realize that you have the means to repay the debt. Lenders are more likely to approve your loan if they see that you have been working for the same employer for at least two years. Once you have applied for a home loan, you must not change jobs or retire before closing. If you lose your job or change a job, your loan might be denied.

These are just a few of the most important factors that might affect your mortgage application. It is crucial to take these into account to avoid negative consequences that might affect your home purchase process.