Most people’s largest financial investment in life is probably made toward buying a home.
Unless you have this amount of money on you or secured in your bank with a lot more to spare, you will need a mortgage to be able to finance this type of purchase, like almost everyone else. The problem is that securing a mortgage is a demanding procedure that is not even guaranteed. Many people make certain to cover all the requirements, yet find themselves short of luck. Meanwhile, a large percentage of people who qualify for a mortgage end up securing an inadequate amount of money. While securing a reasonable mortgage- or one at all- is something one can’t guarantee, there are ways to increase the possibility of getting a satisfactory mortgage. Here’s how you can boost your chances of securing a decent mortgage.
Credit Report: Your Key to a New Home
The first thing that your lender will look at to determine whether you qualify for a loan, and the rate you will be granted if you qualify, is your credit report. A credit report is a breakdown, in full detail, of your credit history and determines your creditworthiness. Since it’s your lender’s number one indicator and your shot of living in your dream home, the credit report shouldn’t surprise you as your lender is. Make it a point to check your credit report throughout the year. Lawfully, you are entitled to one free credit report every year from each: TransUnion, Experian, and Equifax. This way, you can get a free credit report every four months to monitor any changes.
Keep Your Eyes Wide Open for Mistakes
You want your credit report to be as perfect as can be, so don’t leave room for any mistakes. Many people assume that their credit reports are accurate and don’t check carefully for potential faults, which is the exact opposite of what you should be doing. Make sure to check the report thoroughly and keep an eye out for mistakes that could hinder your credit. Watch out for debts that you have already paid or have been discharged, mixed up information because of identity theft, name/address similarity or a wrong social security number, information from an ex-spouse, or outdated information. If you have closed accounts, look out for connotations that signal that the creditor closed an account when you’re the one who did it. You should check your credit report at least 6 months before opting to secure a mortgage. This gives you enough time to look for and fix mistakes. Contact your credit agency as soon as possible if you spot out any mistakes and have them fix them.
Go Big or Don’t Go Home
You should go large with your down payment to show your lender that you can save money and are serious about the process. Large down payments can significantly decrease the loan-to-value ratio, therefore increasing your chances of securing your desired mortgage. The mortgage amount is divided typically by the buying price of the home to calculate the loan-to-value ratio. Use a specialized calculator as an estimate to calculate mortgage rates and easily determine the loan-to-value ratio. Not only does a lower ratio increase the mortgage rate, but it also provides better terms, such as less interest and lower monthly payments.
Give Your Credit Score a Boost
Your credit score summarizes all your financial activity regarding bills and debts. While it determines your qualification as a borrower, the single number that will either do the trick or kill your dream is the credit score. This is because it sums up and represents your ability to pay loans in a timely manner. The FICO score is the most common credit score and is a combination of various sections of the credit data in your report. Your payment history takes up 35% of the score, the amounts owed are a solid 30%, the length of credit history is 15%, the credit mix makes up 10%, and new credit counts as 10% of the credit score. Your chance of getting a decent mortgage rate increases as your credit score increases. After you check the credit report for mistakes, make sure to pay down debt, set up reminders to pay your bills on time, keep revolving credit-balances and credit cards low, and reduce the number of debts owed.
Most people struggle to move into their own homes just because they cannot get a sensible mortgage – or one at all. Securing the mortgage that you need to make the big move is challenging. Besides, the fact that there is no guarantee with loans and mortgages can be very demotivating. Luckily, there are ways in which you can increase your chances of securing a decent mortgage.
