If you’re thinking about buying a new home and using a mortgage to help cover some of the purchase costs, it’s a good idea to get an initial pre-approval from your lender before putting in an offer.

In today’s blog post we’ll share three quick tips that can help to ensure that your mortgage pre-approval isn’t declined.

Demonstrate Your Income and Good Credit

A mortgage is a major financial transaction and one that carries a certain amount of risk for the lender. It’s your goal to help them see that you have the ability to make your monthly payments and that there is very little risk in approving your mortgage. Be ready to demonstrate all of your sources of income and that your credit rating is clean.

It may be worth paying for your credit report before starting the pre-approval process so you can clean up any black marks or false reports and so that you can see what the lender will see when they check your credit history.

Choose the Right Property at the Right Price

As the home you’re buying will be used as collateral to back the mortgage, the lender will need to see that there is enough value in the home to cover the cost of the mortgage should you fail to pay it back. The “loan to value” or LTV ratio is the amount of your mortgage divided by the value of the home. For example, if you’re borrowing $150,000 to buy a home valued at $200,000, you’ll have a LTV ratio of 75 percent. Keep in mind that each lender will have their own target LTV that they prefer to work with, so you may need to shop around a bit.

Start the Process with Multiple Lenders

Finally, if you feel that your income or credit history isn’t perfect you may want to consider visiting a couple of different mortgage lenders to see what they can offer you. There are dozens of different mortgage products on the market today, and each lender has their own set of qualification criteria that they will use to assess risk and whether they feel that you can afford to pay the mortgage back. Getting a second opinion may help you to discover a more suitable mortgage or one with a better interest rate.

As you can see, there are a number of ways that you can work to ensure that your mortgage pre-approval passes without a hitch. For more information about pre-approvals and to get the process started, contact a local mortgage professional today. After you’re approved it’s only a matter of time before you’ll be moving in to your new home.

Are you about to apply for a mortgage loan in order to buy a home? If so, you may be curious about your credit score and how this might impact your financing.

Let’s take a quick look at how FICO credit scores can affect your mortgage and share a couple of ways that you can boost your score to ensure your application is approved.

What is a FICO Score?

The Fair Isaac Corporation (FICO) is the country’s leading producer of credit scoring information and is the primary source that most lenders will check to assess how much risk you present. FICO combines information from credit bureaus such as TransUnion, Experian and Equifax and produces a score ranging from 300 to 850.

The higher your FICO score is, the better your credit history and the lower the risk you present to lenders. If you have a score above 750 you can expect that most lenders will offer you a mortgage and likely a very good interest rate. If you have a score below 620 or 630 you may find it challenging to get approved and below 500 it will be almost impossible.

How Does a FICO Score Affect My Mortgage?

Your FICO score will affect you in two main ways. First, as mentioned above your FICO score will help to determine whether or not you are approved for a mortgage. Second, you’ll find that the interest rates offered to you by various lenders will change based on your FICO score. An individual with a score of 800 and very clean credit presents much lower risk than someone with a score of 500, and thus a higher score generally means a lower rate.

How Can I Boost My FICO Score?

If you find that your credit score is a bit low and you’re concerned that it will have a negative effect on your mortgage application there are a few steps you can take. First, get a full copy of your FICO score and credit history so you can see who is reporting to the credit bureaus and what information they are providing. You may find that there are mistakes or old items that have not yet been removed which you can then challenge to have taken off of your credit report.

While your FICO score can certainly impact your mortgage and your interest rate you shouldn’t let a low score hold you back from applying. Contact your local mortgage professional today to discuss your options and to determine whether or not your credit will cause you to have any issues in securing a mortgage to pay for your new home.