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When dealing with your finances it’s easy to feel like things are out of your control. Buying a house and securing a mortgage loan often amplifies this feeling by putting your financial history on display. That’s why it pays to know which financial weaknesses stand out to lenders so you can strengthen your chances of a mortgage approval.
When a lender receives your application, part of their job is to assess whether you’re able to afford a monthly mortgage payment on top of your down payment and closing costs. While things like your credit history and salary play a large role in the approval process, your bank statement is equally as important.
Taking extra care of your transactions in the months leading up to a home purchase is an easy way to improve your chances of securing the mortgage you want. Here are a few things to keep in mind when preparing your finances for a mortgage that will reduce any scrutiny regarding your bank statements:
Beware of Overdraft Charges
Nothing sets off red flags like a long list of overdraft charges or insufficient funds on your account. No matter what the circumstances may be, this will suggest you struggle at managing your finances (which isn’t the best indicator that you’ll be a good borrower).
In the months leading up to a potential purchase, be sure to keep a close eye on your account. If you have any automatic payments set up for your monthly bills, be sure you have enough money in your account to avoid any accidental overdrafts.
Stay Away from Large Deposits
Depositing a large chunk of change into your account to avoid potential overdraft charges won’t help matters any. Irregular or lump-sum deposits will also come off as a red flag on your application.
Lenders want to know that the money in your account has been there for a while, not just recently deposited. One or two big deposits into your account in the months leading up to your application may suggest that the money you claim to have isn’t actually yours. Most lenders want to ensure you have “seasoned assets,” which requires the money has been in your account for at least 60 days.
Tie Up any Loose Ends
Lenders like seeing consistent payments on things like car loans, for example. But if you have regular withdrawals to an individual rather than a bank this could be considered as a non-disclosed credit account. This is often a tricky situation for young buyers who may have personal loans from their parents in order to pay off student loans, for example.
If you are planning on making a real estate investment, it’s best to tie up any loose ends well in advance to applying for a mortgage.
No matter what your financial situation may be, we can help you prepare for your home purchase by working with you to get your finances in order. If you have questions about preparing for home-ownership, we’d be happy to discuss your options with you. Get started today by filling out our quick and easy online mortgage application, or connect with us and we can walk you through it.
If you have a comment about this blog post, have questions about the different mortgage types we provide or wish to ask any other questions about how to get a mortgage from CVE Mortgage Group, please feel free to contact us