In today’s market getting a mortgage can be more difficult than ever. I’m sure you’ve heard stories of people trying for long periods of time to secure a mortgage. Maybe you’re just interested in the mortgage process and are absolutely clueless about how everything fits together? In today’s market it’s important to do everything in your power to educate yourself before you apply to get a mortgage.
In this article we’re going to cover the steps you’ll need to take if you want to increase your chances of getting a mortgage.
Improve Your Credit Score
Credit scores are becoming less valuable overall when it comes time to securing mortgages. However, if you’ve never taken the time to look at your credit score it can be very valuable.
By looking at your credit score you’ll see the holes you can repair before you apply for a mortgage. Usually, when you order a credit report there will be steps you can take to improve your credit. So, this should be the first step.
Overall, a higher credit score will give you a better chance at securing a loan than a lower score.
Put More Money Down
Loans with zero down payment are becoming less familiar than they used to be during the real estate boom. However, if you don’t have the usual 20 percent of the homes price saved up for downpayment, then don’t worry, there are steps you can take.
For instance, if you aren’t able to put down a high downpayment, but have a high credit score, you can usually qualify for a mortgage. While if you have a low credit score, but are able to put down a higher downpayment there’s a good chance you can still qualify.
Pay Down Your Debts
Since home prices continue to increase faster than incomes, which also means rising mortgage rates, the issue of debt continues to rise. You don’t want to get stuck in a mortgage you can’t afford to pay.
Aside from your mortgage, if you’re already carrying other debt loads, such as, credit card and student loan debt, you’ll want to minimize these debts before you start the mortgage process.
Ideally, you’ll want your debt levels to be less than 36 percent of your total income.
Leave Yourself More Time if you’ve just started the mortgage process you’ll want to give yourself more time than you think. It can take longer to save for your downpayment and improve your credit score than you initially believe. You should give yourself at least a six-month head start. Ideally, the more time you can give yourself the better.
Know What You Can Afford
Sometimes, if you get pre-approved for a mortgage, you’ll see that the amount you’re pre-approved for is actually higher than what you can afford. It can be easy to get excited by this amount and start looking for homes that are outside of your range. However, it’s crucial that you decide on a home that fits within your budget. Only you know how much you can afford, and how much you spend on other sources, like child care, groceries, and fuel. You’ll do yourself a favor by finding a home within your budget.
I hope this article has been helpful and you have a greater understanding of the mortgage process, and what you can do to increase your chances of getting a mortgage. If you take the time to execute on the steps above you’ll be well on your way towards securing a mortgage within your means.