Getting Mortgage Loan Approval During a Bad Economy

A slow economy will affect every person who is seeking mortgage loan approval. Some borrowers may think they are immune to the problem due to excellent credit or high salaries, but no one is immune to large market swings. As banks lower their appetite for risk and home values drop, there are less mortgages available for borrowers. The mortgage market gets more competitive, meaning any borrower needs to stand out from others in order to secure a coveted mortgage loan. 

Monitoring and Preparing Credit Reports

Before seeking a mortgage, it is essential a borrower has paid close attention to his or her credit score for a number of years. This means assuring there are no late payments for at least two years, maintaining low balances on credit cards, and paying off a few other forms of installment loans. Paying off an auto loan or a student loan is a great way to boost credit before seeking a mortgage. Paying off another mortgage is even better. Monitor to the score to assure there are no incorrect reports and protect against identity theft. Ultimately, it is not a good idea to seek a new mortgage if you have large flaws on your credit report within a few years. 

Preparing the Loan Application

The loan application will be your introduction to a lender. This is similar to a job application or job interview. You should be putting your best foot forward on all occasions. You will be judged not just by the criteria on the loan but by your apparent attention to detail and your general professionalism in handling the situation. Do not leave any gaps on the application. If you have a question regarding a necessary element, ask the question before submitting a loan application to assure your initial application is flawless. 

Overcoming Objections

Even if you have excellent credit and references, in a bad economy, the lender will likely have questions or objections regarding your loan application. If you can anticipate these questions, it is best to head them off at the pass. For example, if you defaulted on another loan, prepare a statement explaining why you defaulted and how the situation was resolved. This will show good faith to the lender and additionally show your willingness to participate in open loan discussions. Use every resource you have available including previous lenders you have worked with or your employer to guarantee your financial stability.

Negotiating Terms

A mortgage loan is not written in stone until it is signed. You can effectively negotiate the best mortgage rates. Ask about making a larger down payment, covering closing costs on the home yourself, or other ways to reduce the total amount you need to mortgage. You can further ask about reducing the APR by shortening the loan and making higher monthly payments. Considering all options on the table to determine which will be the cheapest over time is the best way to get a good mortgage you can pay off at the time it matures.