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Take These Steps to Get Approved for a Mortgage

Getting approved for a mortgage may seem overwhelming, but when you break it down into simple steps, you’ll see just how possible it is. The more knowledge you have, and the more you prepare yourself for the mortgage, the more likely you are to get approved and at the terms you want.

Use these simple steps to get approved.

Check your Credit

The first thing any lender will do is check your credit. If your score isn’t high enough, they won’t move forward with your application. Everyone gets free access to their credit report annually. Pull your credit and see where you can improve.

Look for things like late payments, overextended credit cards (more than 30% of your credit line), or incorrect information. Correct anything you can correct yourself (bring payments current or pay your credit card bills down), and dispute any incorrect information with the reporting credit bureau.

Save for a down payment

Most loan programs require some type of down payment. For example, FHA loans allow a 3.5% down payment. On a $200,000 home that means you’d need $7,000 down. You may be able to use gift funds if your family or an employer helps with your down payment, but you’ll likely need money for closing costs or to have them on hand for reserves.
The earlier you can save for a down payment, the better your chances of approval. Even though loan programs have minimum down payment requirements, lenders reward borrowers with lower interest rates and better terms when they put more down.

Stabilize your employment

Lenders like 2-year stable employment history. You can change jobs, but if you do it too often, they’ll view you as high risk.

Try sticking with the same job for a couple of years to show that you’re consistent and reliable. If you do change jobs, try to stick within the same industry and/or make a vertical move, rather than lateral. Show lenders you have what it takes to succeed at your job and they’ll view you as a lower risk.

Get pre-approved

Before you look at homes, get pre-approved. It may feel like putting the cart before the horse, but without a pre-approval, you won’t know what lenders will offer you. What if you can’t get as large of a mortgage as you’d hoped?

When you’re pre-approved, not only does it help you understand how much you can borrow, but it tells sellers you are a good buyer. Without the pre-approval, they don’t know if you’ll qualify or not and they may not accept your bid.

Find the right lender

Your last step is to find the lender that offers the program you need at the terms you can afford. Find a lender you trust and feel comfortable asking questions of before settling. We suggest getting at least 3 quotes before settling for a lender so you know what options you have available.

Young business woman working with calculator while consulting some documents in the office at home.

Bottom Line

The sooner you prepare to apply for a mortgage, the more likely you are to get the loan you need. Lenders don’t expect you to be ‘perfect,’ but the more good qualifying factors you have, the higher your chances are of mortgage approval.