Mortgage approval is not really an easy process. Every lender goes through a convoluted matrix while deciding, whether to approve a mortgage or not. They will put in all efforts to find out if you are creditworthy before giving you the loan. Any missing information can create a whole lot of doubts in their minds. It is better to understand the criteria that each bank or lender adopts before approving a home loan.
This is what the banks or mortgage lenders look for before approving your mortgage:
Your Credit History / Financial background
Your credit score speaks a lot about your financial status. A good credit score would be anywhere between 700 and 800. If yours is less than 400, there are very less chances that your mortgage would be approved. This depends on how and when you pay your bills, if there are any outstanding debts that you have to pay, how you use your credit card and if you are paying up the installments of any other loans that you may have taken. Your credit card statement is something that every lender would check. You may also have to give some references for them to ask around. It is better if you can actually get a credit report done.
The amount of down payment you make
A mortgage lender would normally expect you to put in about 20% of the house value as a down payment. If you can manage this, you stand a better chance of obtaining a mortgage. If not, there is always the option of going for a FHA loan. Here, you only have to put in about 3% of the house value as the down payment.
Although it is not necessary for you to earn a big fat income in order to qualify for a home loan, your income does have a role to play when it comes to mortgage approval. Your monthly income from all sources has to be sufficient enough to pay your monthly mortgage payments apart from catering to your other expenses. Banks usually have a range when it comes to income and if your income fits into their range, you should have no problems in getting your mortgage approved.
Your Current liabilities
Your current liabilities play a huge part in getting your mortgage approved. Banks and individual mortgage lenders usually would like to know what part of your income goes into settling these liabilities every month. In case there is nothing much left over from your monthly income after paying up for your liabilities, you may not stand a good chance for mortgage approval.
Your Relationship with the Bank
It is very important to establish a good relationship with your bank if you want your mortgage to be approved. Banks generally prefer giving mortgages to their old clients due to the kind of financial familiarity they have with them.
Working on these things definitely increases your chances of getting a mortgage approval. However, if for some reason your mortgage is not getting approved, you can try shortening your repayment period, which is sure to impress the Bank or your mortgage lender.
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