Here’s What I’m Doing to Get Ready to Apply for a New Mortgage

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I’ll be applying for a mortgage soon. Take a look at the steps I’m taking to make sure I get the best possible mortgage rate. 

I’m going to be getting a new mortgage loan soon since I’m buying a house. I want to be sure I get the best possible mortgage rate, so I’m taking some steps to ensure that I’m as well-qualified a borrower as possible. I also want to make the process of applying for a mortgage easier for myself, as it’s always been a big hassle when I’ve obtained a home loan in the past.

Here are some of the things I’m doing to make sure I’m ready when the time to get my home loan comes.

1. I’ve paid down all my credit card balances

Mortgage lenders look at both your credit history and the amount of debt you have relative to your income when they decide if you should be approved for a loan and how much you can borrow. So, I want to have as little debt as possible when a lender reviews my application.

I don’t borrow for anything except for buying a house, so I don’t have car loans or personal loans. I do, however, charge everything on my credit card in order to maximize the rewards I earn. This can be a bit of a problem when applying for a mortgage, though, even though I pay my balance in full every month.

Here’s the issue: I pay my balance off when my statement comes to avoid owing interest, but my creditor reports my balance at a different time of the month. So, even though I always pay my cards off, my credit report always shows I have a large balance on my cards.

When mortgage lenders look at your debt-to-income ratio (DTI) to decide whether to approve you for a loan, they take into account the credit card payments you’d have to make based on the balance shown on your credit report. Since I don’t want my DTI to be affected by the fact that it always looks like I have a large balance, I have taken to paying my credit card multiple times per month.

Rather than waiting until my statement comes, I just sign into my online account regularly and pay off the current balance. That way, my card always shows close to a $0 balance because only my most recent charges haven’t been paid off. This helps improve both my credit score, since I’ll have a lower utilization ratio reported to the credit bureaus, and my DTI.

2. I’ve got my paperwork all ready

One of the biggest things I dislike about applying for a mortgage is all of the paperwork involved in the process. Since I am self-employed, I need to submit a ton of documents to lenders. To make the process as quick and easy as possible, I’ve started gathering all the stuff I’ll need. I have digital copies of everything in a special folder on my computer so I can use it when applying for different loans and when my lender requests it.

Some of the documents I’ve gathered include:

Tax returns for the most recent two yearsBank statements showing my down payment moneyBrokerage statements showing my assetsProfit and loss statements from my business

If you are an employee, then you may not need as much documentation, but you should still have tax returns, pay stubs, and brokerage and bank account statements ready to go.

3. I’m avoiding taking on any new debt

Finally, the last thing I am doing is making sure I don’t apply for any new credit cards or loans. Doing so would give me a new inquiry on my credit report, which could lower my credit score and cause my mortgage lender to be concerned about whether I was getting in too deep with borrowing.

By taking these three steps, I can ensure that I’m able to get the best rate possible so my home loan is as affordable as it can be. Anyone who is applying for their own mortgage may wish to do the same.

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