The Secret to Home Loan Approvals (4 tips for getting approved)

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Getting approved for a home loan can:

- Give you more space.

- Give you more privacy.

- Help you build wealth faster.

Unfortunately, home loan approvals can be a challenge.

Getting Approved

There's many confusing home loan terms like:

- Loan to value (LTV)

- Debt to income (DTI)

- Annual percentage rate (APR)

Making sense of these and the different ways to repay your loan can be dizzying.

I've had over 20 home loans.

(not all at once thankfully)

When getting the first one.

I knew nothing about loans.

Fortunately, my first home loan didn't require a down payment.

This was great because—

I didn't have much money.

Since then, I've used home loans to buy 6 more properties.

Many of the loans have been refinanced over the years.

It's taught me a lot about getting a loan.

Working at a bank for many years was a big help too.

If you want to get a home loan.

My biggest takeaway is:

Learn the lender's rules first.

Here's 4 tips (what to ask your lender before applying for a home loan):

Tip 1: Credit Score

Ask what your credit score needs to be.

The rules vary from lender to lender.

It's best to know this up-front before they charge you any non-refundable fees.

Knowing the minimum credit score can save you money and time.

Tip 2: Money Needed

Ask the lender how much money you need for:

Closing costs and/or a down payment.

The lender won't be able to give you an exact amount.

But they'll be able to give you a rough estimate.

The estimate will be based on:

- The program they offer.

- The price of the home.

AIM Loan is my favorite place to run my own estimates.

Their rate quote and closing cost tool is easy to use.

Plus you can compare the info to your lender's estimate.

Knowing how much money you need in advance helps you prepare.

Tip 3: Savings Needed

Ask the lender how much savings you need after buying your home.

This is called "reserves".

Sometimes you need a certain amount of money saved after buying.

And sometimes you don't.

The lender will explain what they require.

Knowing how much money you need in savings after buying helps you prepare.

Tip 4: Debt To Income

Ask the lender about their maximum debt to income ratio.

This is also called your DTI.

Debt To Income

It helps the lender figure out your maximum home loan payment.

For example.

If the lender tells you 50% is the maximum DTI limit.

That means:

You can't spend more than 50% of what you make each month (before taxes) on your home loan payment...

PLUS—

Any other bills that show on your credit report.

Here's an example:

- Dave makes $6,000 per month (before taxes)

- 50% of that is $3,000

So—

Dave can't spend more than $3,000 on his home loan payment...

PLUS—

Any other bills that show on his credit report.

If the only bill on his credit report is a $400 car payment.

You subtract that from the $3,000.

$3,000 - $400 = $2,600

Dave's maximum home loan payment = $2,600

This is a simplified way to explain the debt to income ratio.

It can be confusing at first.

If you run an example or two, it begins to make sense.

Other situations can affect Dave's debt to income ratio too.

Situations like, if he pays:

- Alimony/child support.

- Owns other properties.

- Pays daycare costs.

- Has a business.

Sharing info like this up front with your lender is a good idea too.

Knowing the debt to income ratio limit helps you better understand your maximum loan payment.

Conclusion

Many people apply for a home loan—

And cross their fingers.

Heck...

That's what I did in the beginning too.

But asking questions and preparing in advance can increase your loan approval odds.

The truth is—

Most loan officers work on commission.

They want you to get approved.

Use that to your advantage.

Keep building 💰

See you next week.

P.S.

Need down payment help?

Try this:

First Time Homebuyer Programs (how they work)​