Apart from being the biggest investment most individuals make in their life, buying a home may also be the biggest commitment anyone can make as they need to make timely mortgage payments or risk losing their home. But if you think that paying back your home loan is the most challenging part of buying a home, you’ll be surprised to learn that getting approved for the mortgage is, in fact, trickier.
Lenders are very picky when it comes to who they approved for a mortgage. But that doesn’t mean you cannot do anything to improve your chances. Here, we share some tips on how you can increase your chances of approval for a mortgage:
Watch Your Credit Score
One of the biggest considerations a lender takes into account when assessing the creditworthiness of a borrower is their credit score. This is something that you should be mindful of if you are planning to buy a home. There’s also the added benefit of getting better interest rates if you have a high credit score. To know more about your credit score, you can request reports from credit rating agencies so you can see whether you need to make some changes to get the ideal score.
Correct Mistakes in Your Report
If you do find any mistakes on your credit score, you can connect with the credit rating agency to correct them. While this does not usually happen, due errors in credit reports do occur sometimes so you must make sure that yours are accurate.
Here are some things to watch out for:
- Debts that you have already paid but are still showing as active on the report
- Loans you have not applied for
- Wrong credentials in the credit report
- Outdated information
- Inaccurate notations for a closed account
There are other mistakes to watch out for, of course, but these are the most common ones. You should be meticulous with your credit report to ensure it’s error-free.
Work on Improving Your Credit Score
If your credit score is too low to get approved, the natural thing to do is to work to improve it. The good news is you can rectify this problem, though it would take you some time. A credit rating agency checks five criteria:
- Payment history
- Owed amount
- Length of credit history
- Credit mix
- New credit
The first two make up about 70% of your score, so if you want to improve your score faster, you can focus on improving those two.
Save Money for a Bigger Down Payment
Mortgage lenders prefer applicants who can make a sizable down payment. Yes, it’s true that some get a loan with only 3% down payment from some lenders. But you should know that those come with sky-high interest rates. It’s also likely that they get approved with such a low down payment because they have a stellar credit score.
It would be better for you to start saving so you can make a large down payment as this increases your chances of getting approved significantly.
Work on Keeping Your Debt Low
People with low debt have a higher chance of approval compared to others who are neck-deep in debt. Obviously, a high debt would impact your debt-to-income ratio – one of the biggest criteria lenders check when judging a borrower’s profile. No matter how good your salary looks, if your debt-to-income ratio is quite high, you’ll find it difficult to get approved. So before applying for a mortgage, it’s recommended that you work on your outstanding obligations first.
Improving your chances of getting a mortgage is an important step to take if you are looking to purchase a home. It is important to ensure that you have a good credit score, and an accurate report. You should work on improving your credit score to prove to the lender that you are a reliable borrower. It is also important to have a good down payment, as this will help to reduce the amount of money you need to borrow and will show the lender that you are financially responsible. You can also speak with home loan consultants to better understand how you can be an ideal borrower to increase your chances of getting approved for a mortgage.
Contact Your Trusted Mortgage Specialist Today!
Mortgage Consultants Group is a mortgage company in Sacramento County that offers flexible financing solutions to clients looking for a new home. Whether you are a first time home buyer or looking to refinance, we can help you get the financing solution that you need. Get in touch with our home loan consultants today at (916) 669-1682!