It’s easy to apply for a home loan — you can do it on your phone in minutes right from our website. But if you’ve never applied for a home loan before, you might be concerned about not getting approved. It’s disappointing, and it can make you leery of applying again. Integrity First Lending has some tips for you to help you improve your chances of being approved for a home loan.
Home Loans & Credit Scores
The first thing you want to do before you apply for any type of loan is to know your credit score. There was a time when checking your credit could cost you money or even cause your score to go down, but that’s not the case anymore. You can check your credit any time. And that’s a good thing, because you’ll want to know if there is anything suspicious on your credit report that you need to address.
To stand a chance at being approved for a conventional loan, you should have a credit score of at least 620. For an FHA loan, your credit score should be at least 580.
Keep in mind these are minimums. The higher your credit score is, the better your chance of approval, and the lower the interest rate your mortgage lender will be able to offer you.
Boosting Your Credit Score
There are a few things you can do to improve your credit score — besides making all your payments on time and in full.
This may seem ironic, but if you haven’t made many payments of any kind — if you’ve never had a car loan or a student loan, for instance — this could work against you because on-time payments boost your credit. If there is little data on your credit report, you may want to think about establishing more of a credit history.
If you do have credit cards and you make the payments on time, that’s good, but carrying high balances hurts your credit (and costs you big time in interest charges). To be considered on solid financial ground, you should keep your credit card balances under 30% of your limit for each.
Even if you have no balances, having lots of open credit card accounts can work against you too. That’s because if you have $50,000 in available credit, your mortgage lender knows that you can rack up a debt for this amount at any time, which can impact your ability to pay your mortgage, and they won’t want to take the risk.
Other Factors Impacting Home Loan Approval
For the purposes of applying for a mortgage, a high debt-to-income ratio also impacts you negatively, even if your credit score is good. You may make all your payments in full and on time, but if you don’t have much wiggle room in your budget, a mortgage lender can assume you’re only one major car repair away from financial disaster.
It’s also important to be able to show you have a solid, reliable income. Whether you’re an employee, own your own business or have another type of income, it must be steady and dependable.
We hope that our advice has helped you prepare for homeownership. Call the team at Integrity First Lending anytime you have questions or need help applying for a home loan in Utah.