5 Stone Cold Suggestions to Get Lender Approval
Congratulations! You and your spouse are over the moon happy. You waved at indecision and decided the time was right to become a Kansas City homeowner. If you are like most first-time home buyers, you will need a lender. We have 5 stone cold suggestions to get lender approval for a traditional loan.
Realize, a lender will judge you by your FICO credit score. The credit score runs from 300, considered the highest risk of default, to 850, the lowest risk. Though FHA for years has accepted applicants who have FICO scores in the 500s, the practical reality has been that most lenders scatter when couples present scores under 620 or even 640.
What are FICO 9 credit scores?
Caroline Mayer, the consumer blogger, says, “(FICO 9 credit score) is an algorithm designed to predict your likelihood of repaying debt.” Lenders use your score to shake out approvals for loans and credit cards from those with iffy credit. Insurers use credit scores to set premium rates, and employers use them when making hiring decisions.
Here in Kansas City and elsewhere, many different pieces of data in your credit report make up your credit score. Five categories determine your FICO 9 Credit Score:
- Payment History – 35%
- Amounts Owed – 30%
- Length of Credit History – 15%
- New Credit – 10%
- Types of Credit Used – 10%
5 Stone Cold Suggestions to Get Lender Approval
- Know your FICO 9 Credit Score. You can request a free copy of your credit report, then check it for errors, such as late payments incorrectly listed for any of your accounts and that the amounts owed for each of your open accounts are correct. If you find errors on any of your reports, dispute them with the credit bureau.
- Save your cash. Requirements for getting a mortgage loan often change, and if you are considering applying for a home loan shortly, be ready to cough up the cash. Walking into a lender’s office with zero cash is a quick way to get your home loan application rejected. Mortgage lenders are cautious: Whereas they once approved zero-down mortgage loans, they now require a down payment.
- Get out of debt and don’t buy any big items like a car before applying for a loan. Your debts determine if you can get a mortgage, as well as how much you can acquire from a lender. Lenders evaluate your debt-to-income ratio before approving the mortgage. If you have a high debt ratio because you’re carrying a lot of credit card debt, the lender can turn down your request or offer a lower mortgage.
- Stay in your job, at least until you close. That is one of the 5 stone cold suggestions to get lender approval. Lenders get spooked at the lack of continuity.
- Get pre-approved for a mortgage loan before looking at houses. Pre-approval shows emotional and financial responsibility. On the one hand, you know what you can spend before bidding on properties. And on the other hand, you avoid falling in love with a house that you can’t afford.
Terra Firma Property Solutions, LLC is a professional, full-service real estate solutions firm.
We buy and sell properties throughout the greater Kansas City area. We specialize in buying distressed homes, then renovating and reselling them to home buyers and landlords. Terra Firma Property Solutions: excited to be part of the economic rejuvenation of Kansas City and its surrounding areas.
Call us today at (816) 866.0566
