The process of applying for a mortgage loan isn't as painful as undergoing a root canal without Novocaine, but it's close. Actually, there is no physical pain involved, but you will need to ensure your financial house is in order to make the process go as smoothly as possible. It will help to become familiar with the bank requirements you'll likely have to meet to gain approval.
You'll likely have to be able to make a down payment on the property before your bank will further consider your application. The tougher the economic times, the larger the down payment you'll have to fork over. A larger down payment will also help you get a lower interest rate. According to the U.S. News and World Report website, you can expect to have to put down a minimum down payment of 20 percent to get the best rates.
You'll also need to possess a high credit score to get the best rates, typically a FICO score of 730 or better, as of 2010. If you've been a little tardy repaying those student loans or maybe missed a car payment or two, take the time to do a little credit repair before you apply for a mortgage. It could end up saving you thousands of dollars in interest over the course of your loan.
Banks will want to see that you have a handle on your debt so that things like large car payments and credit card balances won't make it difficult for you to pay the mortgage each month. As a rule of thumb, your monthly debt payments should not exceed 36 percent of your gross monthly income. Now is not time to splurge on a new Beemer or a Hawaiian vacation, unless you're paying in cash.
If you've been a job-hopper, now is the time to settle into a career. Banks want to see that you've had the same job for at least the previous two years to ensure your stability. You should hold off on changing jobs until your loan is approved, although if you've just been appointed the CEO of a Fortune 500 company, it probably won't work against you unless the company has just filed for Chapter 11 bankruptcy.
- house image by Cora Reed from Fotolia.com
- What Is a Balloon Payment for a Mortgage?
- The Fastest Ways to Raise My Credit Score
- What Credit Score Do You Need to Get a Mortgage?
- Ways to Fix Your Credit Score
- What Is Needed to Close a Mortgage Loan in 15 Days?
- The Seller's Rights in a Land Contract Mortgage
- How to Negotiate an Equity Line Settlement
- Why Are Mortgages Slow to Close?