Getting a home loan approval doesn't have to feel like an uphill battle. Below are a few tips to help improve your chances of a quick and easy home loan approval process.

1. Clean Up Your Credit

Credit scores and credit activity have a major impact on mortgage approvals. Timely payment history and being responsible with your credit are very important. The higher your credit score and the cleaner your credit, the higher your chances that lenders will approve you for a home loan.

If you have less than excellent credit, or a history of collections and late payments, never fear. There are a few steps you can take to help improve your score.

  • Bringing late payments current
  • Paying excessive debts down
  • Clearing up any collection items
  • Limiting the number of inquiries or number of times you apply for credit

2. Save for a Hefty Down Payment

The more money you put towards the cost of your home, the more likely you are to get approved. The higher your down payment, the less money you need to borrow. Aim for 20% down if you can. Not only does it reduce your monthly payment, but it may also eliminate the need to pay private mortgage insurance (PMI) and increase your equity in the home.

Tip: Saving a large amount of money can be challenging at times. Savings Accounts and Money Market Accounts typically offer higher interest rates and allow you to access your money when you need it.

3. Lower Your Debt-to-Income Ratio

Your debt-to-income ratio measures how much money you have in debt versus how much money you make. Essentially, it is the amount of your gross income that is going towards your rent, credit cards, mortgage payment, and other debts. This percentage is your debt-to-income ratio. Typically, the less debt you have, the more money a lender will approve for your home, considering you meet all the other requirements.

You can figure out your debt-to-income ratio by adding your monthly debts and dividing them by your monthly gross income:

Debt to Income Ratio = Recurring Monthly Debt/Gross Income
Paying your debts down as much as possible is a significant step to take. First, look at any high-interest credit card debt you may have, then focus on paying down any installment debts, such as car loans.

4. Have Your Documents Ready

Proof of income is required, as well as your assets, liabilities, and employment. Providing evidence of how much you earn, how much money you have saved, and your current debt will make the loan approval process smoother. If you have questions at any point during the loan approval process, reach out to your loan officer as soon as possible to keep the process moving.

The following documents will be helpful when applying for a mortgage:

  • Recent pay stubs
    W-2s for the last two years
  • Tax returns for the previous two years
  • Bank statements for the previous two months
  • Investment account statements for the previous two months
  • Proof of stable employment for the prior two years

5. Ensure Your Job Is Steady

If you’re looking to get a new home, it helps to have a solid two-year employment history. If you changed jobs in the past two years but remained in the same industry, it still reflects as consistent employment. If this does apply, you get a written explanation reviewing your employment history to provide and you can always reach out to your loan officer to see how this may affect your approval.

The more you prepare for your mortgage application, the more likely a lender will approve your application. Focusing on improving your qualifying factors will help you have the highest chance of loan approval with the best rates and terms available.

Jovia's experienced mortgage specialists are here to guide you through every step of the mortgage process. So when you are ready, we’re ready with all you need to make it happen. Schedule an appointment or chat with one of our mortgage specialists by clicking the virtual branch bubble when it pops up on the webpage.