Buying a home is one of the biggest financial investments an average individual makes in their lifetime. It is also a huge commitment for anyone as they must pay their mortgage timely or risk their house. But the most challenging of the mortgage process is not the paying back part or the interest that one has to incur. Surprisingly, getting the mortgage approval can be the trickiest of the lot.
Lenders can be quite picky when they consider your mortgage application. However, you can follow our guarantor mortgage guide here to improve your odds of getting that necessary approval without any hassle.
Pay attention to your credit score.
The most important consideration that any lender would take into account would be your credit history and your current credit score. Naturally, this is something you cannot be lax about at any cost, especially if you want to qualify for the loan. There is also an added benefit that one can get better rates of interest as well. If you have a high credit score, then you would find it reflected in the offered interest rates.
So, as one can clearly see, keeping a credit score can be a crucial part of the mortgage process. You can request periodic credit score reports from the credit rating agencies and keep an eye on how your credit score is performing.
Correct any mistake in the report
Expanding on the precious point, if you find any mistake on your credit score, connect with the credit rating agency, and ask for immediate correction. While uncommon, due errors in the credit reports happen more often than what one might be comfortable with. Not everything on the credit report is bound to be accurate.
Look out for:
–Debts that have already been paid but still showing as active on the credit report
–Incorrect data about a loan that you have not applied for
–Wrong credentials in the credit report
–Incorrect notations for a closed account, etc.
There are some of the more common mistakes that one can spot on their credit report. But there could be many more like this. So, it is essential that you meticulously go through your credit report to ensure that there are no such mistakes.
Improve your credit score
If you find your credit score to be too low to get approval from the lender, then the natural thing to do would be to focus on improving the credit score. Thankfully, your bad credit score can be easily rectified, but yes, it would take some time. And even when you do not have a bad credit score, there is no harm in trying to improve on your current one. It will only help in getting better terms and conditions for your mortgage.
A credit rating agency looks for five major criteria: Payment History for ongoing or past loans, Owed amount, the length of the credit history, credit mix, and finally, a new credit — the first two aggregate to around 70 percent influence on your credit score. So, you can quickly increase your credit score by focusing on these two.
Save for a larger down payment.
Mortgage lender loves (even more so reverse mortgage lenders) when the applicant has the ability to make a sizeable down payment for their purchase. Sure, one can easily get a loan for as low as a 3 percent down payment from many lenders. The interest rate would be pretty high in such circumstances, but the credit score must also be through the roof. So, it will significantly improve one’s chances of getting approval if they start saving to make a large down payment as earlier as possible.
Keep your debt low
If you have low debt, then you would obviously have a higher chance of approval than many of your peers. A high debt would considerably impact the debt to income ratio, which is one of the top criteria that any lender lookout for when judging your profile. Regardless of how excellent your salary is, if the debt to income ratio is on the higher side, you might find it challenging to get that approval. So, clear out your outstanding obligations before applying for a mortgage.
Getting mortgage loans is not at all a complicated task if you follow the tips mentioned above. So, keep them in mind and make sure to get approved for a mortgage loan with ease.