Lenders make homeownership possible for many people who don’t have the available cash to purchase a home. They also help buyers with bad credit or no down payment to obtain loans. Here, Realtor.com offers four ways lenders can assist you on the path to homeownership, along with some recommendations on how to make the most of this relationship.
Lenders can provide pre-approval
If you know you’re ready to buy a home, it’s a good idea to go ahead and get a lender to pre-approve you for a mortgage. This means lenders will check your financial history and determine how much money they’re willing to loan you to buy a home. Pre-approval is proof to home sellers and yourself that you won’t encounter problems obtaining a loan. Try to seek a pre-approval at least a month or two in advance, but don’t begin the process too soon. Pre-approvals are only good for 30 to 60 days.
Lenders can help if you’re denied for pre-approval
Lenders will be happy to work with you if you aren’t pre-approved right away. In fact, most lenders will offer buyers a step-by-step path they need to follow to make sure they are approved. This usually involves boosting your credit score.
Lenders can help you boost your credit score
One of the most common reasons homebuyers aren’t approved is because they have a bad credit score. The good news is that you can take action to raise your credit score by contacting a credit repair company. In most cases, the lenders who denied your loan also will be happy to show you how to boost your credit score. They even can do a “rapid re-score” that corrects and updates info on your credit report in a matter of days.
Lenders can help atypical borrowers
If you’re self-employed, a contractor or running your own business, a lender typically will examine the past two years of your tax returns rather than W-2’s and pay stubs. You might want to apply earlier, however, because there is more paperwork involved.