The Top 3 Ways to Convince a Bank to Give You a Mortgage

Red tape. Stricter standards. Higher credit scores. Those are all things you’ve probably heard about if you’ve tried to get a mortgage since the housing bubble burst. While lenders are making things tougher these days, it’s certainly not impossible to get a mortgage and go out and buy the home of your dreams. So, how do you actually go about doing it?

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1. Be prepared to see things from the bank’s perspective

All too often, hopeful homeowners walk into the bank with a clear picture of the home they want to buy – right down to the amount they want to spend on a down payment, on closing costs, and on interest every month. The only problem? They can’t afford it! Before you get approved for a single cent, your lender is going to look at all of your other debts (like your monthly car payment, your student loans, your credit card debt, etc.), and then see how it stacks up against your monthly salary. If the money you would have to spend on your new home (including homeowner’s insurance, homeowner’s association fees, etc.) would take up too big of a chunk of your salary, you’re not going to get approved for the mortgage – no matter how much you promise to make it work. Instead of spending your time doing some “fast talking”, try to see things from the bank’s point of view. Would YOU loan money to someone in your position? So, what’s the solution? Talk to the bank about alternatives. For example, if you can pay off some of your credit card debt first, you might become a more attractive loan applicant. Or, offering to pay a higher mortgage rate might be enough to make it worth the bank’s while (after all, those higher rates mean more profits for them in the end).

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2. Put more money down

Anytime you can reduce the amount of money the bank has to give you, you increase your chances of getting your mortgage application approved. But how do you actually DO that? Easy! You just make a larger down payment! Let’s say you want to buy a $200,000 house. If you can put $50,000 down instead of $25,000 down, then you’ll only have to ask the bank for a $150,000 mortgage – instead of a $175,000 mortgage. By reducing the principal by $25,000, you’ve taken part of the risk off the table, which just may be enough to get the bank to go along with it! Of course, you may not be able to implement a plan like this overnight. But if you’re serious, you’ll be willing to spend a few months saving up so that you can move forward with your dreams of homeownership.

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3. Think outside the box

If you can’t afford a bigger down payment, you’ve tried negotiating – and the bank still refuses to give you a mortgage – there is still one more tactic that may work. What is it? An FHA loan. FHA loans have become incredibly popular ever since the housing bubble burst, because they eliminate risky mortgages for banks. The FHA is a federal agency that insures that amount of the loan. That way, if you default, the FHA pays the bank back. An FHA loan will cost you more money (for example, you’ll have to pay for things like private mortgage insurance). However, it can mean the difference between getting and not getting your dream home!