7 Tips to Get a Loan for Your Next House

Look at Houses Within Your Budget

If you get pre-approved for a loan of $400,000, don’t look at houses exceeding that amount. Don’t think that if you place an offer of a higher amount, the bank will approve it. Most lenders are extremely strict about the cut-off amount, and your offer may even be turned down if it exceeds the cut-off amount.

Choose the Right Property

As lenders take a financial risk by lending you money to purchase a house, they require that the house is in a decent condition. If the house is a fixer-upper, you may not be granted the loan. FHA, USDA, and VA loans ask that the house meet specific criteria, such as having egress (escape) windows in all bedrooms, a sound roof, and no peeling paint, for you to qualify for the loan.

Get Your Financial Documents in Order

For the loan qualification process, lenders typically want to see your last two years’ W-2 forms, income taxes, and one or two months’ employment check stubs. If you’re self-employed, you may have to show the withdrawals and deposits made to your business account over the past year. You may also have to submit a balance sheet.

Understand how Important Your Credit Score Is

Most lenders are likely to approve your home loan if your credit score is 660 or more. Your credit score depends on your history of paying debts, such as credit card accounts. Find out your score before beginning the home loan process.

Rectify Errors on Your Credit Report

If you make timely bill payments, but your credit score is less than 660, there may be an error on your credit report. The three reporting agencies (Experian, TransUnion, and Equifax) can each issue a free copy of your report every year. If there are errors in any report, dispute it with the respective agency.

Don’t Switch Jobs

To be approved for a home loan, you must have been employed at the same company for at least 6 months, unless you’ve taken a higher-paying job in the same field or been transferred to a new place.

Don’t Make Any Large Purchases

Despite being pre-approved, don’t make any large purchases until your home loan closes as the bank will do a final review of your credit before formally approving the loan.