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How Can I Be The Best Loan Candidate?
You’ve decided to begin your home buying journey and you’ve been told the first serious step is becoming pre-qualified or pre-approved by a lender. This process means your lender is going to be taking a serious look at your finances to decide whether you qualify for the loan amount you’re seeking. Not all loan applicants are approved, and not all loans are offered at the most competitive rate. You want to make sure you qualify for the best terms by understanding what factors make someone stand out.
To ensure you have your best financial foot forward, here are a few ways you can make yourself the best loan candidate for the loan you want.
Practice Good Credit Habits
The primary elements a lender considers when looking at a potential borrower are their DTI (debt to income) ratio and credit score. The former is usually required to be no more than 43% to qualify for a loan, and the latter is established through a variety of financial habits.
To create good credit, you need to show a pattern of paying bills on time. As a loan candidate, you also need to have a history of creditworthiness. This means you have been paying your credit cards over a long period of time, and you haven’t opened or closed new ones in the last eight or so months. Good credit also means your balances are not too high. You should owe no more than half the maximum limit on your cards.
Keep Your Income Consistent
If you’re thinking about applying for a loan, now is not the time to make a career change. Lenders want to see stable, long-term employment. The longer you have had your job or owned your business, the better. Recent gaps in work history can hurt your chances when applying for a loan, so don’t start looking to buy until you’ve spent some time at your current job.
Save for Your Down Payment
One of the benefits of a VA loan is no down payment is required. However, having a down payment will save you thousands in interest over the years. You will also be able to save more of your entitlement for a future purchase by decreasing the cost of the home. Having a down payment can also help you qualify for a larger loan amount from your lender.
Many lenders tend to see applicants with lower down payments as a greater risk, so they are less inclined to loan higher amounts. When looking at your finances, you may see you can make the monthly payments for a larger loan while keeping within your budget, but a lender may be more difficult to convince if they don’t see your ability to save over a long period of time.
Have Your Paperwork Organized
When you have all the traits of a good loan candidate, you want to be ready to show it, and quickly. Your lender is going to ask to see tax returns for the last two years, pay stubs from the last few months, W-2s or other proof of income, and statements from your bank or other assets (such as investment assets or life insurance).
Lenders are looking at these documents to verify stable earning history and you have enough savings to cover a few months’ mortgage payments should disaster strike. Get these documents ready ahead of time, so you don’t fumble during crucial moments in the process.
We Can Help
Going through the process of getting a home loan can be stressful if you don’t have the right people on your side. Many lenders have limited experience with how to structure VA loans, which could cost you money and loss of benefits. Our business is focused on VA loans and our primary clients are veterans and their families. We want to help you get the loan you want, so send us an email at firstname.lastname@example.org or call 844-6-VA-LOAN to begin the process.