Sebonic Financial

Steps You Can Take Before You Apply

To get approved for the best loan, Sebonic Financial offers tips on things you should do before you apply for a loan.

Keep your credit score healthy

Your credit score and history will be a primary factor in whether or not you’re eligible for a loan and what your interest rate will be. Maintaining a high score is very important.

If you plan on applying for a home loan in the near future, maintain a healthy credit by keeping your debt low and the amount of credit you’re using under 20 percent of what’s available to you. Paying your bills on time is one of the best ways to keep your credit score healthy.

Save more to increase your down payment

If you’re purchasing a home, try to make as large a down payment as you can reasonably afford. A larger down payment can make a significant difference in whether your home application is approved or not. The more you contribute as a down payment, the more attractive you are to a lender.

Most loan programs allow contributions from family members or friends for the down payment too, provided they’re gifts and not loans. Lenders will require contributions from family and friends to be accompanied by a gift letter asserting you don’t have to repay the money.

Know your home’s real value and prepare for the appraisal

If you’re refinancing your current home, do your research and get a realistic value of your home. It might be good to ask a good realtor to perhaps assess the value of your home.

Your lender will have a professional appraiser do a thorough appraisal of your home. Prior to the appraisal, you should make sure it’s clean, in good working order and has good curb appeal.

If you’ve made significant home improvements or repairs in your home, prepare a written list to give the appraiser. Pointing out these improvements may increase your appraisal if they would otherwise have been overlooked.

Get a copy of your credit report and check it thoroughly

Before applying for a home loan, obtain your credit report. Yes, this costs some money, but it could make the difference between qualifying and getting denied, and save you thousands of dollars in interest over the life your loan.

Get a report that includes all three credit bureaus–TransUnion, Equifax, and Experian. Look for errors, deragatory items, and statements you may have added. If you find any, follow the steps below.

Correct credit report errors and close unneeded accounts

If you find incorrect late payment counts, closed accounts indicating as still open, or accounts you’re not responsible for, contact the credit bureau to have them correct it.

If you have open accounts that you don’t use anymore, such as store credit cards, contact the vendors and close the accounts.

Clear up any derogatory items on your credit report

Derogatory items on your credit report such as collections, judgments, and charge-offs can negatively impact your credit scores and prevent you from getting the best deal possible – or getting a loan at all.

If there’s anything negative on the report, contact the creditor and correct it or work out a payment plan. If you requested a correction, after its corrected, go back to the credit reporting agency to see if the negative item has been updated.

Remove any credit report consumer statements

People often add consumer statements to their credit reports to dispute the reported information. If you’ve added a consumer statement to your credit report that could cause the lender to question your qualifications, get it removed–especially if it’s related to your mortgage.  When a mortgage underwriter sees these comments, they may make a request additional information or documentation that otherwise could have been avoided. Consumer statements can take some time to remove, so do it well before you apply for a loan.

Unlock any credit report freezes before beginning the loan process

Many people are freezing their credit bureau information for security. Credit freezes can take some time to clear, so if you have them on your credit report, make sure to remove them for all three of the major credit bureaus–TransUnion, Equifax, and Experian–prior to applying. Otherwise, it can delay the processing of your loan and cause you to incur additional fees for rate lock extensions.

Review our Choosing a Loan Program That’s Right for You to learn more about different loan programs and which is right for you.

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