Improve your status with mortgage lenders
Owning a home is a dream shared by millions of people. Investing in a property that can be owned within 15-30 years of closing the home makes more sense financially for many than continuing to rent and having little to show for over time.
The first step to take when considering entering the real estate market is to make sure your finances are in order. Various factors will influence individuals’ ability to obtain a mortgage, and here are some ways to make yourself more attractive to potential lenders.
Check your credit report.
Lenders will check your credit report before deciding if you are a risk or a safe bet for a mortgage. It therefore makes sense to check your credit report before speaking with a lender. The Federal Trade Commission says anyone can get one free credit report per year from each of the three credit bureaus. If you split it, you can get a credit report every four months so you’re on top of anything that might affect your ability to get a mortgage. A credit score (FICO) that is too low can disqualify you from a mortgage loan. Each lender sets their own thresholds when evaluating and approving loans, but the higher your credit score, the better.
One way to improve your standing in the eyes of lenders is to pay down your credit card balances to reduce your credit utilization rate. High usage occurs when there is a high balance against the credit limit, Business Insider explains. Additionally, it may be a good idea to avoid applying for credit via new credit card applications for several months before applying for a loan, as these applications can affect your score.
Be realistic about what you can afford.
Do your homework and figure out your target interest rate and monthly payment and how much down payment you can afford. It will help you research potential lenders and give you an idea of what might be on offer.
Pay your bills on time.
Paying your bills promptly not only helps you avoid late fees, but also has a positive effect on your credit. Financial resource The Mortgage Reports urges diligence when paying rent, as late rent payments can prevent you from getting a mortgage. Lenders consider rental history the best indicator of whether you’ll make your mortgage payments on time.
These are some of the ways to make a potential buyer look better in the eyes of mortgage lenders. Individuals can talk to finance professionals about what else they can do to improve the possibility of getting mortgages at the best possible rates. (MC)