When mortgage interest rates dip low, you may be ready to apply for a home loan to buy the house you have always wanted. However, you will need to ensure that your financial standing is strong so that your loan application will be approved. Here are five important steps you can take to help you successfully get a mortgage loan.
Start by obtaining a copy of your credit score from one of leading financial record-keeping companies like TransUnion, Experian, or even Credit Karma. Often you can get the report for free. It is a good idea to get a copy from one of these agencies, as the information may differ based on collected data. Check to be sure everything is accurate, including your name, social security number, address, and debt history. It’s not uncommon to find errors, usually minor, so be sure to contact the agency and ask for corrections as well as a follow-up copy of the report so you can see whether the corrections were accurately recorded. With this snapshot of your credit standing, you can decide where changes are needed, such as paying down debt or avoiding late payments on outstanding balances.
Savings and Investments
Although a savings account or investment portfolio are not usually required for a mortgage loan, it is almost like having credit insurance to have one or both. In case your income slows or stops, you will have some funds to keep up with your mortgage payment. Lenders appreciate that kind of planning.
If you have a history of paying your bills late, this is a good time to change that habit. Paying on time is one of the easiest and most important things borrowers can do to facilitate mortgage loans. If large payments are taxing your budget, contact your creditors to see if you can make partial payments temporarily until the balance begins to dwindle.
Take a look at your monthly consumer credit expenses as well as your monthly budget. Compare those bills to your monthly income. If your bills are taking a huge portion of your income, pay off smaller balances as soon as possible to eliminate the pressure on your budget. Lenders like to lend money to people with more income than bills to help you keep up with mortgage payments on top of everything else.
Avoid New Debt
If you already have a fair amount of consumer debt, don’t open more credit accounts or run up high balances. Hold steady on spending to maintain flexibility between income and debt to accommodate a new mortgage loan.
These are steps the credit-savvy consumer should be doing anyway to protect his or her credit reputation. Take action now to clean up your credit and optimize your chances of a mortgage loan approval.
If you’re faced with major financial decisions, make sure that you consider your options carefully for the greatest results on your financial health. Consider the impacts on your credit score, your debt accumulation, and your ability to build up long term savings. These elements will have a major effect on your life if mishandled, so seek professional financial advice if you feel your options are running dry.