Career Advice - A Community Blog

Erik Larson writes about the job market, resume improvement, and career advice

Ways to Improve Your Chances of Being Approved for a Mortgage

Written by Erik Larson, Community Blogger | Oct 12, 2017 6:38 AM

After the recent credit crunch, lenders made it more difficult for people to get mortgages. They want to be sure their money is in safe hands. However, you can still increase your chances of getting a mortgage. Here are the top 5 tips that you can use. 


Improve Your Credit Rating

Your lenders want to be convinced that you have the financial muscles to pay back the mortgage. One of the best ways you can do this is to search your credit reports in advance to know if you have a great repayment record. Your credit report provides your past overdrafts, mortgages, credit cards, some utility payments, and mobile money. 

In the past, you were required to pay some money to get your credit report. However, today you can get yours for free. It's important to check all the elements that are listed in your report as you can't be sure your future mortgage lender will be interested in which of them. If you have any difficulty, hire credit repair services such as Fix My Credit to help you find out your credit score and fix it at the right time. Finding out about your low credit score for the first time in front of your prospective lender can lead to your outright rejection and be quite embarrassing. 

Reduce Debt

By taking a mortgage, you are borrowing a huge amount of loan. So you want to reduce your total amounts of debt to be able to focus on the mortgage. Mortgage lenders want applicants to set aside no more than between 56-and-43 percent of their total gross monthly income to repayment of loans like credit cards bills, car payments, and installment loans. The former percentage applies to conventional mortgages while the latter one to government-insured mortgages. 

If you are considering buying a home, start by paying down as much debt as you can with the aim of ensuring your total debt falls within these guidelines. But you don't need to pay off all your debts. Just aim to have as little debt as possible and ensure you pay it regularly. This shows your financial responsibility. 

Make a Large Down Payment

Have your down payment ready in your bank account before you sit down with your lenders. For you to be taken seriously, ensure it's a large amount. Your down payment can come from your personal savings and cash gifts. To be safe, however, confirm the sources of these gifts before applying for your mortgage. I want to use funds from retirement accounts such as the traditional IRA, Roth IRA, and 401(k), ensure you also confirm the procedure for borrowing from the accounts and the amount of money that you can use for a house purchase. 

Use Someone Else' Savings

If you are unable to raise a large down payment, but you know you are able to pay the mortgage in time, you can ask your friends or relatives to assist. Lenders have no interest in loaned deposits that you undertake to repay monthly but welcome loans that your friends and family members give you. If you have people in your life that can offer you cash gifts outright, they can help you too. 

However, if your people can't give you money, they can still be of help to you in many other ways. Some lenders allow first-time buyers or some of their members to use the savings of their own folks to increase their own borrowing limit without any cash changing hands. You can also have your parents act as guarantors if they are financially strong. 

Educate Yourself on Loan Processes

Once you have checked your credit ratings, compiled the entire necessary financial document, and do any other things that can improve your odds, take your time to educate yourself on the loan process itself. You may know all the important things, but if you have no idea what you are going to do to get the right house, brokers may take advantage of you. Search for a professional mortgage broker. But don't stop there. Go out of your way to get a good picture of the going interest rate for a mortgage. 

Getting a mortgage may seem quite difficult, but that's not necessarily the case if you use the right strategies. You can improve your chance by being as attractive to lenders as much as possible. Follow the above tips to be one of the approved few.

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