Not everyone has stellar credit and a job that brings in the big bucks, but that doesn’t mean they still can’t get approved for a loan. If you take a second to look at the situation from the banker’s perspective, would you want to give out a loan to someone who has a history of not making their payments on time? When you apply for a loan, this is your chance to show that you’ve got it all together and to present your best self.
1. Get Your Paperwork Together
To be approved for a loan you’re going to need a few things. First, you’ll need your W2 forms for the past two years, paycheck stubs from the past few months, proof of previous rent or mortgage payments, and a list of all your debts. This list should include credit cards, student loans, auto loans, and alimony. In addition to the list of debts, you need a list of your assets, such as bank statements, car titles, real estate and investment accounts.
2. Don’t Miss Any Payments
This is probably one of the most important things you can do, be on time with all your payments. You want to have the best credit score possible when applying. If you miss a payment, this may affect your score and when the loan officer checks you may be denied or receive a high rate.
3. Make A Large Down Payment
The odds will in lean your favor if you decide to put down a larger down payment. Putting down a large initial payment shows the lender your seriousness and how you handle your finances. Borrowers are less likely to let their home go into foreclosure with high down payments because they would probably lose that money. Again, from the perspective of the bank, they want to give loans to people they know will pay it back.
4. Improve Your Credit Score
A credit score of 620 will most likely get you a conventional loan, but a 740 or higher will get you a better rate. If your credit is on the borderline, you may want to put some extra work into it. You can start by paying down your debts because the less debt you have, the more likely you’ll be approved for a loan.
5. Avoid Large Purchases Until After You’re Approved
Deciding to spend extra cash or credit on a new TV or buying/leasing a new car may totally derail your loan application. Wait until you are officially approved before you make a large purchase, you don’t want all your work to go to waste.