The amounts of money borrowed with mortgages are usually very substantial. For that reason, lenders will apply rigorous checks before approving such a loan. The criteria will be a lot stricter than those applied for smaller loans like car finance loans. If you apply for a home loan from one lender and are refused, that can make it difficult to get a loan from a different lender. You should educate yourself about how lenders come to their decisions before applying for a loan. We asked a mortgage advisor in Glendale AZ for some advice.
- Credit scoring
One of the most vital criteria prospective lenders will apply is restricting loans to people who have a good credit score. Your credit score is based on your previous credit history. If you have had loans previously and fell behind with payments, that may negatively affect your credit score.
Always find out your current credit score before making a loan application. If your credit score is below 680, you may find it difficult to borrow. Some lenders will offer loans to people with scores below this figure, but the interest rates will be higher. A score below 600 makes it almost impossible to borrow money.
- Build a stash of cash
Lenders like to deal with people who have a substantial sum of money already saved up. Using that cash reduces the amount of money you need to borrow. It also shows the lenders that you are good at money management.
- Don’t change jobs
Put yourself in the shoes of lenders. Would you prefer to lend to somebody who has a long history in his or her current job, or to somebody who has just started a new job? It’s all about stability.
- Do not take on more debt
Adding loans affects your credit score negatively. You should wait until you have been given a mortgage before taking on new debts. You should also avoid applying for new credit cards, including store cards. If possible, try to reduce or clear off existing debts. That will have a positive impact on your credit score.
- Do not over-extend yourself
It can be tempting to apply for the maximum amount you can borrow, but you should ask yourself whether you can really afford to keep up repayments. Circumstances change, such as having more children. You do not want your mortgage to be a millstone round your neck.