Buying a home is a large investment that may necessitate that you apply for a mortgage. Unfortunately, there is no guarantee that you will qualify for the mortgage if you have never owned a home before. You may need to do a few things to help make your proposal more attractive. You must also work hard to improve your odds and make yourself as attractive as possible. It will help you get the best deal. This post delves into ideas from Altrua Financial, which can help you improve the mortgage approval process for beginners.
- Credit score
The first thing you will need to do is to check your credit score. To do this, you may need to get a detailed credit report history to help you determine how much mortgage you qualify for. Typically, you will be entitled to one credit report from the credit agencies every year. Therefore, getting a report from each company every four months can help you monitor your credit score. The credit report will tell you whether you can qualify for a mortgage or not.
- Fix the mistakes
Once you receive the credit report, please spare some time, and have a closer look at it. It will help you to determine the mistakes that could impact your chances of getting approved for a mortgage. Check at debts that you have paid or those that have been discharged. Also, check if there is any false information that may be impacting your credit score. Besides, find out if any information from a previous spouse should not appear on the score. Keep an eye on outdated or misleading information on your report.
Once you have identified errors in your report, notify the agency about the errors and correct them.
- Sort your paperwork before submitting them
Lenders will want you to prove that you are organized and that you will be able to comfortably pay the loan. Besides, your level of organization will tell them a lot about you. So organize your papers and send them as one batch. It makes the work of the review team easier and speeds up the process.
- Work on improving the credit score
The credit report will show a summary of your debt payment history. Lenders will then use the report to determine whether you qualify for the mortgage or not. A higher credit score is a guarantee that you will get approved for the mortgage. But if the credit score is poor, you may not get approved for the mortgage. As such, you must try to improve your credit score. Also, if there are unpaid debts, you may need to start paying them to reduce the amount owed.
- Debt –to- income ratio
The ratio compares your debt with your income. It could be calculated by dividing the monthly debt by the gross income. It will provide some details on your ability to make monthly payments. It also helps to calculate the mortgage you can afford to pay. A low debt ratio is good. It shows that your debt and the income compare well. A debt income ratio that falls between 28-43% is good. It implies that the lenders cannot deny you the mortgage. However, if the ratio is above 43%, you will need to take the necessary actions to improve it. You may reduce the monthly ratio by buying less on credit. Also, look at items you spent most of your income on and decide those you can do without. You may also need to secure a second job or work for extra hours to improve your monthly income.
- Be ready to make a large down payment
Lenders will be willing to approve a mortgage if you can show them that you can save some money. By indicating that you are ready to make a large down payment, it tells them that you have the skill to help you save and pay the mortgage. Furthermore, it tells them that you stand a better chance to service the loan. Lastly, it reduces your loan-to-value ratio and allows you to qualify for a mortgage at a lower interest rate.
Note that lending practices have become too tight and are making it difficult for applicants to qualify for mortgages. Therefore, you will need to take steps to help increase the chances to qualify for a mortgage. Improving your credit score and paying a larger deposit are some of the things that will help your application get approved. Also, reducing the debt-to-income ratio as well as organizing your papers will increase your chances of approval.