How to Get a Home Loan
Tired of paying your landlord’s mortgage, wondering how to get a home loan? Enjoy this article on how to get pre approved for a home loan. If you’re buying a home in southern Ohio, use the home loan form below and we’ll send you a list of quality lenders. We just refer, we don’t ask for sensitive information.
There are a few things very important for getting a home loan. Credit and FICO scores, debt-to-income ratios, employment history etc. Let’s start with your credit and FICO score.
How to Get Pre Approved for a Home Loan
Credit and FICO scores are critical for how to get pre approved for a home loan. Conventional mortgage lenders typically want to see a FICO score of 720, sometimes higher. A conventional home loan is usually 10% - 20% down or more. A few lenders can issue a conventional mortgage with 5% down.
What is a FICO score? Your FICO Score is a numeric value issued by credit bureaus. It's a strong indicator of a home buyers credit worthiness. Mortgage lenders use FICO scores to determine risk. Fair Issac Corporation algorithms calculate these scores. Your FICO score is different than your credit score. This is a good reason to talk to a lender in advance.
On the low end for getting a home loan, buyers with 580 scores may still qualify for an FHA loan. It’s more hoops to jump through, but a lot of home buyers use this type of home loan. The down payment is only 3.5%.
How to Get Approved for a Home Loan
Review Your Credit Report
If you're asking how to get approved for a home loan, look at your credit several months in advance. We see it all the time, a buyer has the income, down payment and good debt-to-income ratio. They find a house they want, apply for a mortgage and learn unpleasant news. There’s issues and errors on their credit report and can’t qualify for the home loan.
90% of credit reports contain errors. A clerk entering data can mishear and mistype your information that goes to credit reporting agencies. Poof, you have an alias now and your credit score suffers for it. That’s just one common example of a credit error that keeps you from getting a home loan.
Dealing with credit errors is the first step on how to get pre approved for a home loan. Realtors do not like to show homes to potential clients without a pre approval letter from a lender. Talk to a lender well in advance of house-hunting and know where your credit stands. Dispute inaccuracies, have items past statutory time frames removed.
Ensure the Number, Quality and Health of Your Tradelines
In important part of how to get approved for a home loan involves your tradelines. Tradelines are revolving accounts and monthly payment schedules. Examples include credit cards, auto and student loans, etc. If you want to qualify for a conventional line, you’ll need at least three. FHA loans typically ask for two.
The quality and health of these tradelines is critical for how to get pre approved for a home loan. Mortgage lenders want to see they’ve been active for one full to two years. When it comes to credit cards, a major credit card is what you want. This is critical for how to get a home loan. Avoid store credit cards, get a Master Card or Visa. The credit card accounts need to be at least six months old with on-time payments.
The credit cards also need to show credit history with regard to balances too. You could buy what you normally do and pay it off each month. For the best credit scores, and how to get a home loan, never pay them off. Instead, keep the balances between 10% and 20% of your credit limit. This shows responsible usage.
Don’t apply for a new card six months before getting a home loan. Applying for a new credit card isn’t how to get a home loan. A little discount isn’t worth losing pre approval for a home loan. Don’t close any older credit card accounts either, you lose all the history. Make sure all these accounts show healthy credit usage.
Stop Using Credit if You're Buying a Home
I don't mean making little purchases and making your regular monthly payments. Again, how to get approved for a home loan - keep the balance below 20% of your limit. I've been warning would-be home buyers to not run amuck buying appliances and home improvement purchases.
Did you know (I've actually seen this happen) a buyer gets pre approved for a home loan, gets an offer accepted, one week before closing he opens an account at Home Depot with a $10,000 limit, charges $1,200 for lights and other fixtures. Imagine his dismay when he’s informed by the loan officer that the underwriters are denying his home loan due to a 10 point drop on his credit score. Don’t buy a new car for that new garage, just sit tight until that house is yours.
Don’t Start Moving Money Around
This won’t prevent you from getting a home loan. However, if you find a home you really want, time is of the essence. Home buyers need to provide documents. Mortgage lenders want several months of bank statements; checking, savings accounts etc. If you close an account, move large sums of money around, make transfers, it greatly increases the time and paperwork.
Getting a Home Loan – Cincinnati area mortgage lender
Shop around when it comes to mortgage lenders and getting a home loan. If you intend on doing some comparison shopping, have the credit pulls done within two weeks of each one. You take a little “ding” on your credit score for applying. If you have them done within two weeks of one another, you’ll have only the one “ding”.
If you’re looking for a home loan in Southwest / Southern Ohio, the Greater Cincinnati area I can help. I buy and sell dozens of homes each year and frequently make referrals to lenders.
If you’d like a list of quality lenders I trust and work with, complete this form. Your information is never shared with third parties and I don’t ask for sensitive information. I just send you a list of lenders.