5 Tips to Help You Secure a Mortgage

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When trying to secure a home loan, there are several things you should do well ahead of time to make the process go smoother. You will need to gather your paycheck stubs, bank statements, and tax forms. Start compiling all these things now because you will need to show them throughout the mortgage process. The five tips to help you secure a mortgage are as follows.

1. Savings

Many types of mortgage loans do not require any down payment, but you will have more options if you have some cash. If you put down 20%, you will not have to buy mortgage insurance. Mortgage insurance insures the lender against you if you default. 

Physician mortgage loans do not require mortgage insurance. They are available to individuals in medical professions. Military personnel, retired or active duty, may qualify for the VA loan. You do not need any down payment or mortgage insurance for this type of home loan.

You will need some cash for incidentals. There are other things to pay for besides the down payment. You will have to pay closing costs. These pay for title and escrow services and lender fees. You will also need to pay for any inspections that you have performed on the property.

2. Employment 

You must be employed or provide proof of income to qualify for a mortgage. You will need to show that you have held that job for some time. If you just started a new job, it must be in the same line of work as your previous career.

Lenders do not want to see gaps in employment. If you were not working for some time, you might need to write a letter of explanation. Some reasons for not working are maternity leave or illness.

3. Debt

Your debt to income ratio cannot be excessive. Some debt is good because it shows your ability to repay an obligation. During the mortgage process, do not open any new lines of credit. This will change your ratio and may disqualify you. Keep making all your payments on time. 

4. Credit Score

Check your credit score. Everyone is allowed one free credit report from each of the credit bureaus every year. There are three credit bureaus. If you have a low rating, take some time to improve it before applying for a home loan. To keep a high score, pay everything on time, and control your debt.

There may be an error on your report. Each agency has a procedure for you to challenge anything on the report. It takes time to settle disputes, and it takes time after the correction for your score to increase.

5. Get Pre-approved

Before you start shopping, visit a mortgage lender. The lender can tell you which types of loans you qualify for. You will also find out how much cash you will need as well as your monthly payment.

A free online mortgage loans calculator does not always give the full picture. It may not factor in property taxes or insurance. Just know that those are only estimates. For an accurate figure, visit a home loan lender.


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