How Can I Improve My Loan Approval Process?
Homebuyers can improve the loan approval process by taking several steps before applying. It’s important to start the process on the right foot. For example, assess your current financial situation. Your goal is to separate your income, expenses, and other financial responsibilities. Now it’s time to view your finances in the same manner as a lender.
During the application process, lenders apply several ratios to the applicant’s finances. Several ratios act as stress tests. Buffering is a popular test. Lenders take a look at the applicant’s income and expenses. Then, they take potential loan terms and increase the interest rate by 3%. This allows them to see how the applicant’s finances hold up after the increase.
Another ratio lenders apply is the 28% rule. Lenders take four weeks to six months to evaluate an applicant’s ability to repay a mortgage. It can take that long to stress test their finances. Lenders search for patterns in the applicant’s spending habits. Ideally, an applicant will request a mortgage amount that nets 28% or less of their monthly income.
Gathering all the requested financial documents and filling out the application completely remain two more ways to improve the loan approval process.
Mortgage House offers several tools to help clients see their finances from a lender’s perspective including the mortgage choice calculator. Try it for free.
Improve Loan Approval Process Conclusion
To improve the loan approval process, prepare before applying. In addition, improve your financial situation before applying. Our Mortgage House loan specialists can also answer your questions to help speed up the process. Contact our team today.