Get Approved for a Denver Home Mortgage
How to Get Approved for a Denver Mortgage Loan
There are three main things that lenders will look at when you apply for a loan. They are:
- Credit: Do you have a history of paying you bills, and on time?
- Income: Do you have enough income to afford mortgage payments?
- Assets: Do you have enough assets to afford the down payment and closing costs?
This information about you is crucial to the application. But the lender must also approve the property based on the appraisal report. Here are some reasons why a property may be denied by the lender:
- Insufficient value: The property is not worth the sales price.
- Safety issues: The property is not safe for habitation.
- Unmarketablity: The lender would have difficulty selling the home if you went into foreclosure. This may because it is not accessible year-round, or it is an unusual style of home (log, dome, etc.).
If you have been approved based on your financial information, but the property has been denied, you may simply need to find a different property that you want to purchase.
What Goes Into a Credit Report?
Two things go into a credit report: your credit score, and your monthly liabilities.
Most loan programs require a minimum credit score of 620 for approval. But if you don't have a credit score at all, you may still qualify for a loan if you can prove that you have been paying at least 3 different accounts (rent, utilities, car insurance, etc.) over the past 12 months.
If you are unhappy with your credit score, there are certain things that you can do to improve it over time:
- Pay your bills on time
- Make sure all your accounts are current
- Pay down the balances on your credit cards
Certain major monthly liabilities are also included on your credit report, such as rent, insurance payments, etc. This does not include food, gasoline, etc.
You may know that assets are basically anything you have that is worth money. But lenders are only considered with certain assetsliquid assets. Liquid assets are those which can be turned into cash quickly, such as checking and savings accounts, money market accounts, certificates of deposit (CDs), mutual funds, stocks and bonds, 401(k) accounts, and IRAs. Lenders want to make sure you have enough liquid assets to pay your downpayment and closing costs, and that you will be able to make mortgage payments even after a loss of income.
Non-liquid assets are those which cannot be turned into cash quickly, such as cars, art, antiques, and businesses. These will not figure into your mortgage application, as they will generally not help you to pay off your mortgage.
How much money do you need for a down payment? It depends on a number of things:
- Loan type (see the various loan types on this page for specifics)
- Property type (condos may require a higher down payment)
- Occupancy type (primary residence, second home, or investment property)
- Your credit score
- The current state of the local market
There are many things that contribute to closing costs. There are fees that go to the lender, the real estate agent, the appraiser, and other third parties. Here are some things to know about closing costs:
- Once you give the mortgage broker all the required materials (your name, monthly income, Social Security number, property address, estimated property value, loan amount, and signed sales contract), the broker has 3 days to deliver a Good Faith Estimate (GFE) of the closing costs.
- Before closing, you will receive a Final Settlement Statement showing the exact closing costs.
- The seller is allowed to pay for the closing costs, up to a certain amount, depending on the type of loan.
Locking the Interest Rate
Once you have signed a sales contract, the lender cannot give final approval of your loan until the interest rate has been locked. The interest rate should be locked at least 10 days before closing, if not earlier. Interest rates are usually locked for 15-day increments (15, 30 or 45 days), so be sure the lock will last through closing. Otherwise, may you have to pay for a rate-lock extension to ensure the rate does not change before closing.
When shopping for a home, it helps to know how much you'll be able to borrow. With a mortgage pre-approval, you can be approved for a mortgage up to a certain amount. You can then bid on a house within that limit by submitting a pre-approval letter along with your offer.
Disclaimer: Kenna Real Estate. Blog does not guarantee nor is in any way responsible for the accuracy of the information provided herein, and provides said information without warranties of any kind, either expressed or implied. Blog posts on the Kenna Real Estate. Blog represent the opinions and ideas of the author(s). Kenna Real Estate. Blog does not express the views of Kenna Real Estate. or those of the broker.