Unless you have the money to buy a home upfront, you need to prepare to get a mortgage. It is something you need to do to ensure you qualify for one before approaching a lender. Here are some of the things you can do to ensure you get a mortgage.
Review your credit report
Your lender will be looking into your credit score to determine your credit worthiness. Depending on the lender, some require a good or excellent credit score. If you have a favorable credit score, then you should quickly get a letter of preapproval and prequalification. You can, therefore, zero down your home search to houses within your budget. In case you have a negative score, you can improve it by paying your bills and debts off on time.
Make payments on time
If you intend to take out a mortgage when buying a house, ensure that all your bills, including phone bills, rent, loans, and utility bills, are always paid in full and on time. If you easily forget to pay some of your loans, it is advisable to set a timer for when they are due. You can even set an automatic payment with your bank for some bills some as loans.
The borrower debt to income ratio is one of the things used to determine a credit score. Your lender will also use this ratio to determine how much debt you qualify for. When you have lower debt, you get to be eligible for a higher amount of mortgage, and you can even have lower interest rates.
Do not open new accounts unless you have to
You should be very careful when opening new accounts. When opening an account, there is a hard inquiry on your credit score, which can hurt your score. It also happens when you co-sign a loan for another person. If you can do not co-sign any loan for someone else since it will increase your income to debt ratio.
Adopt a saving culture
When you purchase a house, not all costs will be covered by your mortgage; you will need to cover some of the cost such as taxes or insurance from your pocket. Sometimes your house may require repairs and new furniture and appliances. Create a budget that will allow you to save some money every month. If your budget does not allow for saving, you can even take an extra job.
Pay any collections
Paying any collections will improve your chances of getting a mortgage as it improves credit scores. Ensure that you get documents as an acknowledgment of receipt of the collections. To be more confident, keep copies of the payment check in case of any misunderstanding.
It’s essential to prepare to get a mortgage before you apply. You will get an opportunity to minimize the chances of getting rejected. It will also save you time for when you are denied, and you start all over again by trying to improve your credit score. You will have a chance of getting a higher mortgage loan with lower interest rates.