Getting a mortgage can be tricky if you don’t have the best financial history. Lenders are cautious about handing out such large sums of money to just anyone, and many prospective homeowners often experience a rude awakening when their first loan application is denied. Thankfully, if you have been denied in the past or if you are about to apply for the very first time, then there are some things you can do to increase your chances of an approval.
1) Try to pay down as much debt as you can
You don’t need to enter the mortgage loan process with absolutely zero debt, but if you owe too much to your creditors, then your potential mortgage lender will see you as a much bigger risk, and will question your ability to pay back a large home loan. Furthermore, even if you do get approved, the amount of debt you have will determine the size of the loan you can get. Take some time to get your debt in order before jumping into homeownership.
2) Save money first
On top of paying some of your debt down, you don’t want to walk into your lender’s office with no cash to your name. Build up your savings first and you will have a much easier time getting approved.
Many mortgage lenders now require a down payment as well, so if you’re not able to pay a good chunk of cash up front, then you’re not going to be seeing a loan. Also, the larger the down payment you are able to make, the less you will have to pay off in the future.
3) Try a different lender
Maybe you have fairly small debt and pretty good savings, but your loan application gets rejected anyway. In this situation it is important to not panic or give up hope – simply try another lender! Every lender has a different set of criteria. However, if you get rejected by multiple lenders, then you need to take a second look at your financial situation, as the problem is likely with you and not with them.
4) Get a co-signer
Finding a financially stable co-signer who is willing to co-sign on your loan can make a big difference in the loan application process. However, you only want to look for a co-signer if you know that you will be able to make your monthly payments but your lender needs some extra convincing. You don’t want to end up dragging your co-signer into a financial mess should your own income not be enough.
5) Consider a less expensive property
Finally, sometimes you are just going to have to put your dream home on hold in order to make your first step onto the property ladder. If you simply can’t get approval for the mortgage you want, then consider looking for a home in a less-expensive area, or choosing a townhouse or condo instead. Aim for what you can feasibly afford, and you’ll have a much easier time getting a loan.