If you want to become a homeowner and are not sure what is involved when it comes to mortgages, you need to learn how to improve your chances for approval before you get started. Since lenders have tightened their requirements, so it can be quite challenging for you to become approved. If you take some time to learn what you can do beforehand, you will be able to become a homeowner much sooner. |
Your credit score is very important. In the past, lenders were very lenient and practically gave away mortgages to any and everyone. Now that those days have passed, lenders are scrutinizing the credit scores of every applicant they get. Before you start jumping through any hoops, find out what your scores are. If you have poor credit, your chances for approval are virtually nonexistent. However, if you are willing to work on improving your scores, you can increase your chances for approval and get better interest rates, which means a lower monthly payment.
You are entitled to at least one free credit report each year. Take advantage of that benefit and use it to learn what your scores are from each one of the three credit bureaus. Make sure that your report does not contain any outdated or inaccurate information. Those errors can drop your scores significantly. An ideal score for mortgages is anything in the mid-600s and up. While a score in the low 600s won't make you stand out, it is not unheard of to be approved for a home loan, however your interest rates will be very high. The sooner you get prepared, the easier it will be for you to meet the requirements for approval. This means that you should check your credit scores and know where you stand. Make sure that your finances are in order. Shop around for a lender that you feel comfortable with and can trust.
Start paying off some of your debt. If you owe student loans, car notes and credit card debt, start paying it off before you apply for any mortgages. Even if you have good credit, a big factor that can affect the lender's decision is your debt to income ratio. Try to contribute more to any monthly payments you are currently making on cars, student loans and credit cards. Most lenders look for candidates that have debt expenses that are less than 30 percent of their gross monthly income. By paying more towards your debt, you can lower your housing expense ratio and improve your credit score and chances for approval at the same time. Right before and during your application process, try to delay making any big purchases and opening any new lines of credit. This could case your application to be flagged and cause your application to be denied.
Make sure you have all of your paperwork together beforehand. You are going to need bank statements, pay stubs, tax returns, credit statements and documentation on anything regarding your finances. Once you have gotten everything together on your end of the table, start applying for mortgages. You have already improved your chances for approval, so now you just have to be patient.
When it comes to mortgages, Fenton, MI residents consult with the Financial Plus Federal Credit Union to get the help they need. For more information, visit: https://www.financialplusfcu.org
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