10 WAYS TO INCREASE MY CHANCES OF GETTING A MORTGAGE

[Joshua West]

18 years old wanting to get into real estate investing, wanting to find out the best ways to increase my chances of getting a mortgage, can think of a few like good credit score, stable income etc. wondering if there was any more...

[Penny Clark]

@Joshua West, I have been through the loan process several times. Here's what I suggest:

• Build a good credit score by getting a credit card and paying it off quickly - check with your local credit union and apply for a secured visa/master credit card that will convert to a regular card after six months of a positive payment history. This will take time, but once you get approved for your first card, it gets easier. You'll have to build a history of credit card use too. Your endgame is to shoot for a credit score of at least 760 or higher. You can do this by paying on time (everytime!), using no more than 35 percent of your available credit once you acquire more cards. This will keep your credit utilization to what you have charged number low which will increase your score.
• Debt to income ratio (how much debt you have / income) should be no higher than 35 percent.
• Have a stable job history in the same field for at least two or three years. Most lenders don't count income from an employer if it isn't listed on your tax returns for at least two years. This goes for part-time income as well. They also don't like to see you career hopping either in a short time period.
• Start saving any extra income you have toward the down payment. Typically, if you aren't going to house hack (live in one unit while you rent out the others), you will be asked to come up with as much as 25 to 35 percent of the purchase price of the loan for your first investment and your interest rate will be slightly higher. Of course, you can try for an FHA loan, but you will have little equity in it and have to pay the private mortgage insurance that goes with that. Whenever possible, live in the property for at least a year before you turn it into a rental. Just remember, the higher the down payment you have, the other barriers to getting the loan become less important.
• Get your paperwork together so you can present it in a neat, organized manner to the loan officer and, more importantly, his/her underwriter who will ultimately approve/disapprove the loan. This includes: two months of current pay stubs, two years tax returns, two months of bank statements, and a credit report with your score from all three bureaus (TransUnion, Experian, Equifax). The bank will run their own (which you'll pay for) but you should know where your starting point is. To get an idea of where you stand credit score wise, go to creditkarma.com - it's free. You can also get this from https://www.annualcreditreport.com/index.action.

Also, in Brandon Turner's book " Rental Property Investing" you'll find an awesome chapter on how to present your paperwork to the bank. This is important because getting pre-approved for your loan is the first step to finding an experienced realtor who will want to work with you.

Best of luck and don't forget to share with us your first purchase!