When you want to get financing for buying a home, you have to ensure that your mortgage application will be perfect. Otherwise, you risk getting rejected and this will have serious consequences. Firstly, you will not get the home you have been dreaming of. What’s more, the rejection will have a negative impact on your credit score and consequently on any future applications. For these reasons, you must use all available advice which will help you apply successfully.
Meet all new requirements.
In 2014, the lenders’ are legally required to pose stricter requirements on mortgage borrowers. You must have credit-to-income ration which is lower than 43%. You must provide full documentation on all of your major financial transactions for the past two years plus pay slips and bank account statements.
The other requirements have not changed, but you must ensure that you meet them. You will need credit score of at least 680, good recent credit history, stable employment income and sufficient savings for a down payment of at least 5% with a conventional loan and 3.5% with an FHA loan.
Prepare all the paperwork.
In addition to the W-2’s and the bank account statements which you need to provide, you have to have the full paperwork on all major transactions and documents which show the origin of larger deposits. If you have sold your car, for instance, you should be able to provide a copy of the sale agreement. Similarly, if you have got a bonus which you transferred to your savings account, you will need a copy of the document for the issuing of the bonus from your employer.
It is extremely important that you document financial gifts even if they come from close family members. Since the transaction is informal, your best bet is to request the person to write and sign a gift letter. You can find samples online and present a ready letter to the gift maker for signing.
Check for errors.
You should get a copy of your credit report right before making the mortgage application and confirm that there are no errors in it. Typically, this check is done before shopping for a mortgage, but you should perform it again just to be on the safe side. In the same way, you must check your application thoroughly before submission. This is important since even a simple spelling mistake can cost you dearly.
Know the value of the property.
You need to estimate the financing which you require based on the purchased property value as precisely as possible. This is because the lender will request appraisal and will have the right to make changes to the requested loan amount based on it. In this case, you may end up with less money than you expected and you may be unable to afford the property given its asked price.
Finally, it may go without saying but you should not make any major changes right before making a mortgage application. You should not change your job, make a large purchase or get a new consumer loan or credit card. You would not want such a move to ruin your efforts.