How to Optimize Your Mortgage Application

You have decided on applying for a home mortgage loan home mortgage loan, but you wonder how to present yourself in the best possible light before the lender in order to gain on lower interest rates and favorable loan terms? Check the main clues below and work for it:



Work factor – it is advisable to have a two-year work experience in order for the income variable to be determined. Fixed salary is easier to be examined and it could easily be calculated in the income- to debt ratio. Switching between jobs prior to the home loan application could negatively affect your eligibility however a fixed salary slightly compensates for it because of the predictability it brings in one's income. If one's wage is based mainly on bonuses and commissions he has to prove a stable history of regular earnings through which he will be able to cover the interest payments on the loan.



Credit Score – based on one's credit report. It is based on 5 main factors which greatly influence one's attractiveness to a lender, it assists in estimating the risk a borrower poses to the lender and his trustworthiness.



Debt-to-Income Ratio (DTI) – compares one's total debt (student loans, car loans, taxes, insurances, etc. - generally anything that cannot be paid with a six-month period, which excludes utility and food expenditures) to his income. The greater the ratio the less attractive the loan application is to the borrower. For example a resulting 45% debt of one's income will most definitely cause a denial of further home loan financing.



Loan-to-Value Ratio (LTV) – compares the balance of one's mortgage(s) to the current market value of one's property. The higher the ratio – the harder to (re)finance the property.



One final tip is worth mentioning: do not omit paying on the older loan (if such) until granted the new one. It's possible to hear such "recommendations" but do not fall for them, because if you do not keep current on the old loan the old lender may report your delinquent payments and thus harm your credit report, which consequently will affect the rates and the terms of the new loan you are applying for.