Numbers Count: Will that mortgage application get approved?

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Numbers count. They matter to bankers and to prospective homebuyers, sellers, and real estate professionals. Here’s my take on the key numbers on the housing market this week.

Closeup on a home mortgage application, with eyeglasses and a pen.The numbers: If you apply for a mortgage or a refi, will your application be rejected? Fewer and fewer Americans think so, according to the latest New York Federal Reserve data. The percent of consumers surveyed who expect their mortgage or refi application in the coming 12 months to be rejected declined in October compared to June and a year ago, according to the New York Federal Reserve’s October Survey of Consumer Expectations Credit Access Survey released Nov. 18.

The percent of likely mortgage applicants who expect their applications to be denied fell in October to 34.5% from 35.7% in June and 39.5% a year ago. Meanwhile, 28.1% of those expecting to refi said they anticipate their application will be rejected, down from 29.1% in June and 31.3% a year ago.

What counts: If you’re going to apply for a mortgage, you want to believe you have a good chance of success. The good news is many lenders are willing to provide credit to qualified buyers.

Here are four tips that may help improve your odds of success in a mortgage application:

1. Get preapproved. A preapproval letter from a lender for a mortgage gives you and a seller a good indication of what you can afford. By presenting a preapproval letter with an offer on a home, you are indicating to the seller that you are serious about buying a home, you have funds for the cash down payment, and that you are working with a lender that is willing (pending a final credit decision, of course) to give you a mortgage for the home you are interested in.

2. Get familiar with new forms. In October, homebuyers started receiving two new, simplified disclosure forms in the mortgage process: a Loan Estimate (LE) at the start of the application process and the Closing Disclosure (CD) near the end of the process. These forms show homebuyers all their borrowing costs: the monthly payment, the long-term borrowing costs, the detailed costs for a particular mortgage, and the total cash needed when signing for a mortgage. Learn more about these forms on the Consumer Financial Protection Bureau’s website.

3. Prepare for closing costs. Know how much cash down you will need at the closing of your loan, and be prepared to set that money aside. You may need several thousand dollars to cover closing costs, such as the property appraisal, loan processing, title insurance, and title inspection and recording fees.

4. Prepare a budget. A budget — including closing costs for a mortgage, property taxes, insurance, maintenance, and utilities — may help ensure you don’t overextend yourself with a mortgage or a cash-out refinance. Remember, you may have added costs such as buying appliances or taking care of potential repairs, or higher transportation expenses if you move to a home that is farther away from your job. Factoring everything into a budget may help you scale down your expectations and keep you in a housing price range that is more manageable.

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