One of the biggest obstacles you’ll have to face as a first-time homeowner is getting approved for a mortgage. There’s lots of back and forth between the bank, credit bureaus, and various other parties. If you don’t know what you’re getting yourself into, this process can be daunting, but if you know a few tricks you’ll have a much smoother ride to the finish.
Check Your Credit Score
This is the first, and most important, report any lender will look at. Your credit score will have a huge impact on how much the bank will loan you and what interest rate you can get. There are plenty of ways to check your credit score for free, so sign up for one and look for any mistakes. It can take a long time to fix any mistakes and improve your score, so the faster you can check, the better.
Pay Off Debt
Another big mortgage factor will be your debt to income ratio. The exact ratio will depend on the lender, but normally lenders won’t consider giving you a loan if your debt takes away more than 40% of your income. So, before you apply for a loan, pay off as much debt as you can, and do it fast. Credit scores will take some time to update once you pay off debt, and bringing in a receipt of payment won’t get you anywhere with a lender.
Get Prequalified
Once you get your credit score and debt squared away, find the lender you want to use and get prequalified. This isn’t the same as getting officially approved for a mortgage, but it’s a strong signal to sellers that you’re a legitimate buyer and it lets you know what your price range needs to be. The process for getting prequalified isn’t too tricky, assuming you follow steps 1 and 2, and most lenders are good about walking you through the process.