1. Keep good financial records. Your lender will want copies of your last 2 years of income tax returns, copies of recent bank statements, proof of income, and copies of your retirement accounts. If you receive any portion of your income in cash, be sure to document the source.
2. Minimize outstanding debt. For mortgage underwriting purposes, your total monthly debt payments, including your mortgage, consumer loan payments, credit cards and so on, should not exceed 43% of your monthly income.
3. Show good savings habits. Lenders love to see a consistent pattern of savings - including automated payroll deposits into a savings account, and regular contributions to a 401k. The deposit amounts do not need to be large; showing consistency is key.
4. Clean up your credit history. Even if you believe your credit is good, you should review your credit history at least once a year. Lenders prefer to see credit scores at 720 or above for a conventional mortgage. FHA loans will consider scores in the mid-600's. You can obtain your credit history from annualcreditreport.com and your score from MyFico.com.
5. Have a good down payment. While FHA mortgages allow as little as 3.5% down, you will be forced to carry mortgage insurance for the life of the loan. This can be $75 or more on top of your monthly payment. Instead, you could obtain a conventional mortgage with at least 5% down, and carry mortgage insurance until you have enough equity to waive it. In order to completely avoid mortgage insurance, you would need a down payment of at least 20%.
6. Show a consistent work history. As a rule of thumb, lenders prefer to see you at the same job for at least 2 years. Consistency in your line of work is also a positive.
7. Don't rock the boat. Once you are pre-approved for your mortgage, keep your financial picture consistent through closing. Do not take out new credit, or close old lines of credit. Avoid changing jobs. Any financial changes can cause your lender to delay, or even revoke, your final loan approval.
Ready to speak to a mortgage lender? Let me help! As your Accredited Buyer Representative, I will refer you to trustworthy mortgage lenders, and help you throughout the home buying process. I have helped Arizona home buyers for over 30 years, and I'd like to help you too!
Tina Nabers
Nabers Property Management & Real Estate
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