Starting Your Mortgage Application

Obtaining a mortgage can seem like a daunting task. You can make it a lot easier by preparing a great application. Using these three simple tools can help you evaluate your prospects for a new home loan.
Get Credit for Paying Your Bills
Your credit report is a critical way for lenders to assess risk. A higher credit score doesn't just help you qualify for a loan, it can also lower your mortgage interest rate significantly.
The difference between one or two interest rate percentage points can be a few hundred thousand dollars over 30 years. Your score need not be a perfect 850 to qualify. A score of 700 or better will keep you in the running.
Cover Your New Home Loan
Coverage is just a fancy term bankers use to determine whether you make enough money to make loan payments. Typically, lenders use an analysis tool known as "28 and 36." This means your monthly mortgage payment should be less than 28% of your gross monthly income while your total debt payments (credit cards and mortgage included) should remain under 36% of your gross monthly income.
Impress a Banker with Mortgage Collateral
Lenders are always looking for as much security on a loan as possible. After extending your credit, the bank will take out a lien on your property. In case you default, they will have first rights to it.

As you might imagine, the more your house is worth relative to the loan, the more security the bank will have. Before obtaining your new home loan, be sure to obtain an assessment from a reputable authority so you don't get shortchanged.

Thinking as a lender could help you get the home you want and save a pile of money doing it.

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