What are Mortgage Lenders Looking for in a Borrower?

My Mortgage Docs to be Reviewed by an ExpertLouise writes for MoneySupermarket, a price comparison site in the UK dedicated to saving households money. As she teaches her 2 year old daughter about money, she attempts to educate her 25 year old husband at the same time!

Buying a new home is an exciting and daunting prospect, especially for the first time buyer. When I set out to buy my first home a few years ago, I wanted to make sure that I got the best possible mortgage rates and would not meet with disapproving glances from tut-tutting mortgage lenders. After all, you can’t just waltz into any old financial institution and be immediately greeted like an old friend, before even making preparations for this important step.

So, I checked out websites with information on first time buyer mortgages to make sure I understood exactly what was involved. There are several things that can be done to impress mortgage lenders so that they will almost bend over backwards to secure your signature.

Watch Your Credit Rating

One of the best ways to be impressive is to have a solid credit score of at least 660. The higher the score is, the better. This shows lenders that you are financially responsible and can be trusted to pay them back. This will naturally be looked on favorably. Think of it like the high SAT score grads that colleges practically fight over.

High credit scores are obtained by making sure you always pay off all your loans on time, as well as never missing a payment. This includes never missing a rent payment or a utility bill payment. Credit reporting companies are unforgiving if even the tiniest payment has been missed.

Down Payments Are Key

Another important factor in securing a good mortgage rate is the size of the down payment. At least 20% is the best way to ensure that mortgage lenders will take you seriously. Not only is this good for getting on the good side of the big money boys, it also saves you big in the long run.

I am lucky because I have always been interested in home ownership so I started saving early. As a result, I could afford to pay down a substantial chunk of money that will save me thousands in the future. The more down-payment there is, the less the mortgage will have to be. I knew I hit a home run when I saw the delighted look on my mortgage lender’s face after I told her how much I was planning on putting down.

Have a Steady Lifestyle

She was even more impressed when she found out I had a steady job that I had worked at for the last five years. Financial institutions are very conservative folks and who can blame them. The starving artist story might sound good in a novel, but it rarely impresses financial types. Having a steady job shows financial lenders that you are the salt of the earth and can be trusted with large mortgages. So, anyone wishing to buy a house should definitely be steadily employed.

I have never really been into credit card buying, although I hear this is all the rage nowadays. Owing a lot of money on credit cards is usually not a good thing when you are looking to take out a mortgage.

The lenders like to see as little debt as possible. Their main priority is that you repay their loan and not what you owe the credit card company. So, paring down on the balance on all credit cards is a good idea before embarking on the quest to be the best credit risk for lenders. Hopefully, these tips will help successfully negotiate first time buyer mortgages.

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