3 Keys to Being an Attractive Mortgage Candidate

When you’re searching for a home loan, you want to make yourself look as financially attractive as possible to a mortgage lender. Having a good credit history, a healthy down payment and job stability are three key ways to boost your buyer attractiveness.

If you need some help with one or all of these categories, don’t worry—with a little work, you can fix those first-time home buyer blemishes.

Mortgage Approval Key #1: Have a Stable Job

Evidence of a dependable income stream can help you get a better mortgage rate and make you look more attractive to lenders. Because people tend to change jobs and careers more frequently these days, banks understand a certain degree of turnover.

However, the longer you are with one company—or at least in the same career or field—the better it looks to a lender.

Stay in your present position for a while, at least until you have secured the loan. If you have changed jobs or fields within the past two years, be prepared to explain why to your lender.

Know your income-to-debt ratio and don’t try to buy a house outside your means.

Mortgage Approval Key #2: Manage Your Credit

Lenders are more likely to deal with people who have good credit. Many people have made mistakes when it comes to credit, but there are things you can do to clean up your score:

§  Get a copy of your credit report and make sure it is accurate. If you find things that are incorrect, request to have them changed or removed.

§  Try to pay down your current credit cards. It’s good to have a moderate balance to show activity, as the credit card companies will report this as positive activity to be used as a reference.

§  Try to lower your debt-to-income ratio by paying off other bills so you are as liquid as possible.

§  If you have bad credit, start by paying your bills on time until your score improves.

§  Don’t take on new debts—wait until after closing to buy that big TV or new car.

Mortgage Approval Key #3: Have a Down Payment

A down payment for a mortgage is a good chunk of change, but it’s a chunk that makes you a more appealing buyer. Ideally, you will want to save up for at least a 20% down payment. The more you can put down, the lower your monthly mortgage payment can get. Some buyers may want to purchase positive mortgage points to lower their interest rate.

While you can get a loan with less than 20% down, you will probably have to get private mortgage insurance. However, if you can get a Federal Housing Administration (FHA) loan, you won’t need nearly that much. These  government-backed mortgages have low down payments but are a little tricky to get. Still, you should see if you meet those requirements.

Speaking of finances, you want your home buying experience to be a pleasant one, so take the time to put your finances in order the right way and save yourself some stress. Once you have made yourself as attractive a candidate as possible, find the right mortgage, get pre-qualified and then start shopping.

Updated from an earlier version by Philip Commins.