If you want to purchase a home, you may have to apply for a mortgage. Lenders look at several factors to decide whether to approve applicants. If you understand what they look for, you can improve your chances of being approved. 

What Increases the Chances of Being Approved for a Mortgage?

1. Good Credit Score

Your credit rating is based on several factors, including the length of your credit history, how much debt you have, and whether you pay your bills on time.

To get approved for a loan at a lower interest rate, aim for a score of about 740. If your score is below 700, you can boost it by using cash for larger purchases and leaving old bank accounts active. 

2. Employment

Before approving you for a mortgage, lenders want to make sure you have the means to make steady payments. 

In addition to W-2 wage statements from the past two years, they may request recent pay stubs or call your employer to verify that you have a job. 

3. High Down Payment

The more money you put down on a home, the lower your monthly mortgage payments will be. You will also have more equity in the house initially.

Aim to save at least 20% of the house’s total cost for a down payment. This is a requirement for many jumbo loans, and will help you get lower interest rates as well. 

4. Low Debt-to-Income Ratio

This ratio refers to how much debt you owe relative to your income. Most lenders prefer to lend to those with debt lower than 43% to ensure you’ll be able to manage mortgage payments while paying your debts.

To calculate this value, add your monthly debt payments and divide this number by your monthly income. If the percentage is higher than recommended, pay more of your debt before applying for a mortgage. 

If you’re ready to buy a home, turn to Dan Main in Missouri & Colorado. He has been a loan officer for more than 20 years and will help you find the right financing options for your budget. He takes the time to explain the difference between certain loans and creates lasting relationships with his customers. Call (636) 284-4144 to schedule an appointment, or learn more about different mortgage programs on his website. 

Dan Main: NMLS # 502036
Flat Branch Mortgage Inc: NMLS# 224149
947 Waterbury Falls Dr., O'Fallon, MO 63368
(636) 284-4144