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Boost Your Chances of Getting Pre-Approved for a Mortgage

In Denver Real Estate, Mortgage Rates | on July, 30, 2012 | by | 0 Comments
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As the years-long real estate slump begins to subside, lenders are still making it difficult for even the most credit worthy buyers to qualify for a mortgage. As a result, it’s become more important than ever to pre-qualify for a mortgage before you go shopping for Homes for sale in Denver. But before you embark, there are a number of ways you can boost your chances of pre-qualifying.

  1. Real estate school denver teaches about the benefits of paying down debt, and it’s true for everyone who wishes to secure a mortgage. The key is to reduce or eliminate as much monthly debt as possible, like car payments, student loans, and credit cards before submitting a mortgage application. It’s important to try and reduce your debt to income ratio. But with the mortgage meltdown, lenders are tightening their requirements, some going as far as stating that an applicant’s total housing expenses shouldn’t exceed more than 28 percent of gross monthly income.
  2. A Denver Realtor will always advise a client to clean up his or her credit before trying to get pre-approved. Start with figuring out what your reported scores are. By law, consumers are entitled to one free credit report each year from the three major credit bureaus. It’s important to correct false or outdated information. A sad reality is the market now shuns sub-prime borrowers, as lenders are demanding credit scores now of 680 or higher. That’s extremely difficult for many borrowers to achieve in this economy.
  3. Put off any large purchases you’re considering, especially a new car loan, as recommended by Real Estate Agent Denver. This means avoid applying for new credit until after you’ve been approved. Last minute spending sprees can be difficult to avoid, especially for new buyers already planning for interior decorating and appliances for their as-yet purchased home.
  4. Boost your down payment, a favorite piece of advice by century 21 denver. Nothing improves your chances like bringing more money to the table, which lowers your loan to value ratio and puts your application in a better light. Many lenders will expect proof of large, unexplainable deposits to your bank account before applying for a loan. In other words, if you received a loan from Uncle Bob, he needs to sign off on it as a “gift” – even if both parties know otherwise.
  5. Gather all your necessary documents. A Real Estate Agent in Colorado will tell you your lender expects to see pay stubs, credit documents, income tax returns, bank statements, assets, and all financial statements.
  6. Lending restrictions are tighter than ever before, so be prepared for this reality. If you’ve perused denver real estate listings, then you know home prices are still out of reach for many first time buyers. Set your expectations, and be aware that many lenders require down payments equal to 20 percent of the loan, except for some FHA-sponsored programs. You may be able to get pre-approved with a smaller down payment, but that presumes sterling credit and an extremely low debt to income ratio. In today’s market, conventional financing limits are normally “28/36,” with no more than 28% of a borrower’s income going towards housing costs, and no more than 36% of total income is going toward all debts, mortgage included.

A final piece of advice when getting ready for a pre-approval application is to think twice before taking on someone else’s problems – that means declining to co-sign for a loan of any sort, whether it’s a loved one, business partner, or frat brother from college.

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