Home Loans: What You Need to Know to Get Approved [10 Item Checklist]

Jul 28, 2022

If you want to know how to get approved for a home loan, you've come to the right place. According to the National Association of Realtors® 2021 Home Buyer and Seller Generations Report, 87 percent of recent buyers and 97 percent of buyers 40 years old or younger financed their home purchase. With the majority of homeowners requiring a mortgage to purchase their dream home, it’s time to dive deep into what it takes to get your home loan approved.



Home Loans Shouldn’t Intimidate You

Although there are some steps involved, getting approved for your home loan quickly is possible! Working with the right lender and starting your research early will help you get that much closer to getting pre-approved for the mortgage you need for the home of your dreams. Follow these simple steps to get started.


1. Save Up Some Money for a Down Payment on Your Home Loan.

Over the past year, according to the Mortgage Reports, the average down payment on a house or condo was just 12 percent. For home buyers under the age of 30, home loans averaged a down payment of just 6 percent. Traditionally, 20 percent down payments were the popular perception. Although a down payment of that size will substantially reduce the loan's overall cost, certain government programs and first time home buyer programs offer lower down payment requirements.


2. Request a Free Credit Report and Carefully Review it.

This will help you identify ways to boost your credit score and the likelihood of approval. For example, you may discover errors that negatively impact your credit score which you should report to a credit bureau. Make sure you clean up your credit several months prior to beginning your home loan application to give the errors time to be removed from your credit report.

3. Consider Paying Off Some Accounts Before You Apply for a Home Loan.

Many lenders won't approve your home loan application if you owe money to a collection agency. If you have any debt that is being followed by a collection agency, it would be in your best interest to clear that up as soon as possible. High credit card balances can also reduce your credit score and impact your ability to apply for a home loan. Paying off some of your existing debt may help your debt-to-income ratio, which is one of the numbers lenders review when considering a loan application.  Speak to our mortgage specialist before you pay off any debt or collection accounts. 


4. Home Loans Require Paperwork. Start Gathering it Now.

Independent contractors may need their 1099-MISC forms. If you work for an employer, you should find your W-2 forms, paycheck stubs, and a document indicating when the company hired you. You will likely need two years of documentation for any home loan application, so taking some time now to find everything is a good idea.


5. Select a Lender that Offers Desirable Mortgages Before You Schedule Any Real Estate Showings.

Rather than just comparing mortgage rates, remember to consider factors like customer service, convenience, flexibility, and familiarity. You will also want to find a lender who is familiar with your market and can provide you with a mortgage pre-approval letter so that your real estate agent and any possible sellers you will work with will know you mean business when you make an offer to buy a house. Finally, be sure you review what mortgage programs are available. Some local lenders offer specialized mortgages that can help first time home buyers or other niche groups searching for a home.

6. After Learning How to Get Approved for a Home Loan, Work with the Lender to get Pre-Approved for a Mortgage.

Pre-approval is as close as you can get to confirming your creditworthiness without having a purchase contract in place. You will be required to complete a mortgage application and the lender will verify the information you provide. They’ll also perform a credit check. If you’re pre-approved, you’ll receive a pre-approval letter, which is an offer (but not a commitment) to lend you a specific amount, good for 90 days. Lenders  take a detailed look at your finances when granting pre-approval. You might be asked about a car loan payment you made with a credit card, for example. Be prepared to answer lender questions as soon as they come up.

Getting pre-approved is a smart step to take when you are ready to put in an offer on a home. It shows sellers that you’re a serious homebuyer and that you can secure a mortgage – which makes it more likely that you’ll complete your purchase of the home.


7. Look Online As You Search for Possible New Homes.

Browse real estate listings and find an appealing house that you can afford to buy, maintain and insure. Make a reasonable offer on the property. Sellers readily accept offers when they know that reputable lenders have prequalified buyers for mortgages.


8. Don’t Get Caught Up in the Excitement and Over-Pay for Your New Home.

If an owner accepts the offer, the homebuying contract goes into effect and your lender can approve the purchase. This decision largely depends on the results of an appraisal. It's crucial to select a home that's truly worth more than the amount you need to borrow.


To discover your maximum house-hunting budget, download our free guide:How Much House Can I Afford in Connecticut?


9. Be Patient When the Home Loan Process Requires Time.

The underwriting process can take some time. It includes the underwriting team accessing the property and your mortgage application. It may take a few weeks. To expedite this process, be sure you have completed all the required documents and included all the paperwork required. In the meantime, avoid spending money with credit and put off any plans to apply for other loans or credit cards.

10. Appraisals Don’t Have to be the Final Word on Your Home Loan.

If the appraisal prevents a mortgage approval and the estimated value doesn't seem realistic, you can request an appraisal rebuttal. Otherwise, you're probably ready to schedule a closing and start planning to move into your new home. Congratulations!



Your Local Lender Offers Home Loans

Finex’s Mortgage Team can help you through the seemingly complicated home buying process. Our local experts are familiar with the community and the people that play a part in a quick closing on your new home.

Our FHA Loan, CHFA Loan, and Conventional Mortgages are sure to offer the features you need as you search for an affordable mortgage. Get pre-approved today, so you can start shopping for the home of your dreams.

For more tips on home loans and finding the right home and mortgage for your budget, download our "How Much House Can I Afford in Connecticut?" guide.