Homeownership is a difficult dream to achieve—with the rising real estate market prices and the demand ever increasing, finding your dream home can seem elusive. The reality is far from this notion, however—finding your dream home can be entirely possible with the right tools and partners. However, there is a barrier difficult to overcome: budget.
Buying a home will require you to make the biggest purchase of your life. You’ll need to plan your next steps carefully, especially when it comes to down payments, renovations, and of course, the ever-dreaded mortgage applications.
One of the biggest determining factors of an approved loan is the credit score. Most prospective homeowners end up with rejected loans due to poor credit history, and it’s an instance you never wish to experience.
A little knowledge goes a long way—to learn more about the importance of credit and other factors that may affect your mortgage applications, here’s a quick guide for you:
Why are credit reports important in the mortgage loans process?
When it comes to mortgage loans, bear in mind that financial institutions and lenders will analyze your credit history closely, scrutinizing every single detail. It goes beyond just looking at your scores, making credit reports the most crucial part of the homeownership process. Here’s why:
1 - Lenders will review your recent applications thoroughly
Before approving your loan application, lenders will want to take a look and see your other applications. This includes both credit and debit, and can, unfortunately, ruin your chances. Should they find a semblance of a problem, you’ll be subject to difficult inquiries. When debt is involved, they’ll want to ensure that you can pay for your mortgage diligently.
2 - Lenders will dig deep into your payment history
Apart from existing loans, lenders will also want to scrutinize your payment history. This includes other loans, credit cards, and other relevant details. You’ll want to show that you have a track record of repayments, which shows that you will be a responsible mortgage payer.
3 - Lenders will look for possible dispute statements
If you have any pending disputes or statements on your credit report, questions will also begin pouring from mortgage lenders. They may end up looking at these items negatively, affecting the overall underwriting process. If you have pending disputes, make sure to wait for resolutions before applying for a mortgage.
What else to consider: The role of your assets and income
Another important aspect that mortgage lenders tend to look at is your source of income. Mortgage lenders would prefer to give a loan to those who have the ability to pay them back, and so they will most likely require you to have a stable source of income. They will require you to state how you earn money (such as businesses or employment), and they may also take additional sources of income (such as money from stocks or other investments) into account when assessing this aspect.
When you state your source of income, lenders will often have to verify the information. To do so, they may contact your employers or ask you for your income documentation. Therefore, it’s best to give accurate and verifiable information to prevent any potential problems from arising.
Assets are also an important aspect when applying for a mortgage loan. Lenders may ask you for your list of assets such as savings accounts, bank statements, stocks, and bonds, among others. Assets of high value can increase the chances of lenders accepting your application. Having such assets could let them know that you’re more likely to be able to pay for mortgage payments even if you lose your job or meet an emergency.
Eyes on the Prize—Keep Your Credit Scores Intact
Your credit report plays one of the most important roles in your mortgage application, so it’s only logical that you ensure that it remains squeaky clean. Make sure to reassess your numbers before applying for a mortgage, and don’t hesitate to review your assets and income as well. When it comes to your dream home, your sacrifices will be worth it.
For the best real estate agents Genesee County, MI, Smith Street Homes has you covered. Allow us to help you achieve your dream home—no matter your need, we’ll help see it through. Build, find, move, and even apply for mortgages with us. Reach out to us today to learn more.