8 Tips to Qualify for the Best Home Loan Online

Are you preparing to qualify for a home loan online this year? It is a great time because home values are rising and rates are still very low, with the average rate for good credit borrowers under 4%. If you want to qualify for the absolute best home loan online, we advise borrowers to follow these eight simple tips:

#1 Raise Your Credit Score!

Of course, you say, I need to raise my credit! Yes, but we want to provide you with some specific tips that some people may not know about:

  • Get your credit card balances as low as you can. Ideally, you want to have all of your credit cards as close to zero balance as you can. The larger your credit line that is unused, the better your score.
  • If you can, open a new credit card with a several thousand dollar credit line and don't use it. This will raise your score because you have more credit line available.
  • If it works out, try to apply for a mortgage just around the time you pay off a car loan. A car loan is usually long term installment debt, and showing that you have just paid that off will really help your interest rate.
  • Do not close old, unused credit lines. Somehow people think that closing old credit lines is a good idea. It is not. Your old credit cards that are unused are seasoned credit lines, and may have been there for years. If they are unused, they are increasing your available, unused credit, which raises your score.

#2 Increase Your Down Payment

A 20% down payment is standard but it is not required. That said, the closer you get to a 20% down payment, the better your rate will probably be. Also, if you have a 20% down payment, you will be able to avoid paying for private mortgage insurance, which is required when you have less than 20% equity. A monthly mortgage insurance premium will add at least $100 per month to your payment.

#3 Get Pre-Approved

It always is a smart move to get pre-approved for a home loan before you go shopping for a home. This will tell you how much house you can afford so that you do not waste any time. You should be able to get quickly preapproved online with most lenders if you have pay stubs, tax returns and bank statements readily available.

#4 Stay at Your Current Job

Mortgage lenders want to see that you have had steady work for the last several years. You should always stay with your current job while you are in the mortgage approval process. If you are thinking about becoming self-employed, that is fine, but you will want to wait until you have closed the loan. There is nothing wrong with being self-employed, but you will need to show at least a year of steady income on tax returns to qualify for a mortgage at that point.

#5 Do Not Take on New Debt

There is a temptation when you are applying for a mortgage to start buying things for the new home. You do not want to run up thousands of dollars of debt. If your debt to income ratio gets too high, it could kill the mortgage approval.

#6 Have Your Documents Available

When you are applying for a mortgage online, you have to provide the lender with your W-2s, pay stubs, two years of tax returns, and your last few bank statements. The more of these documents you have at the ready, you will be able to get approved for your online mortgage faster.

#7 Know Your Loan Options

Whether you get a fixed rate mortgage or an adjustable rate mortgage will depend upon your personal situation. If you are planning to stay in the home for many years, it could make sense to get a fixed rate mortgage. But if you want to move in a few years, you may opt for a variable rate mortgage that will be a bit lower for the first three or five years. The more you know about the type of mortgage you need, the more likely you will get into the right mortgage online.

#8 Keep an Eye on Interest Rates

You should start paying attention to what is going on in the economy and financial sector so you know which way mortgage rates are headed. If it looks like rates are drifting upwards and you are in the approval process, you may want to get the rate locked in for at least 30 days as soon as possible. Fluctuation in the interest rate of just 1/2 a point can have a major effect on your monthly payment.

Getting qualified and approved for a low interest rate mortgage online is quite easy today. Mortgage qualification rules have been relaxed for many loan products. But the smart borrower will heed the advice above so that they get the most affordable mortgage loan that they can.


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