Getting a mortgage can be an indicator of the one most exciting times of your life. It means that you may soon be getting into the home of your dreams. When it’s finally time to apply for a mortgage, it’s important to make sure you get it right. The more prepared you are, the better your odds are of being approved. Following are five ways to increase your chances of getting a mortgage that anyone can do.
1. Know Your Credit Score
Your credit score carries a lot of weight when lenders are deciding whether they will approve you for a mortgage. Ideally, you should know exactly what your score is before you apply. The more informed you are about your credit score, the better able you’ll be to match your score with appropriate lenders. You can get a copy of your full credit report from each of the three major credit reporting agencies, Experian, TransUnion and Equifax, by visiting their respective websites. This is a good time to correct any errors that you find. Note that it can take 30-45 days for errors to be resolved and reflected on your credit report.
2. Apply to the Right Lender
Once you know your credit score, you can apply to lenders that offer mortgages for people in your credit score range. If you are working with a mortgage broker You’ll find a variety of mortgage programs available; even to those with lower scores. If you have a high score, consider applying to a mortgage broker, who will “shop” your application around to several lenders. This is a great way of getting a mortgage that many people aren’t aware of.
3. Have Cash Reserves in Your Savings Account
Lenders like to see that you have a habit of saving and that you have some cash on hand for emergencies. This makes you a less risky borrower, since you could use your savings account to make a mortgage payment if an emergency does arise. If possible, make automatic payments to a savings account every time you get paid. A regular history of savings deposits looks very good to lenders. Also, remember that you’ll have closing costs and some other expenses if you are approved, so you’ll want to save for those in addition to having money for your down payment.
4. Resolve Collections Accounts
Lenders may overlook a low credit score if you have cash reserves. But one thing that may get your mortgage declined is the presence of outstanding and active collections accounts. Note that medical collections accounts are not held against you. But things like credit card collections need to be resolved before you’ll be approved for a mortgage. Try to pay the largest collections accounts first. Anything that’s over $2,000 will definitely count against you.
5. Don’t Make Financial Moves
In the six months leading up to your mortgage application, don’t make any financial moves. This means don’t apply for any new credit cards, don’t buy or refinance a vehicle, don’t get a quote for life insurance, don’t buy an annuity or and above all, don’t close any charge card accounts. Just maintain the status quo. Keep paying all your bills on time. If you can manage to pay off a credit card, that’s okay to do, but don’t close it out. Any financial move you make could impact your credit profile in a way that isn’t positive. Remember, even if a company says they will only do a “soft pull” on your credit report, don’t do it; it’s not worth the risk.
These are five effective methods to increasing your chances of getting a mortgage. When possible, you should implement all five of these steps to help ensure that you have the best possible odds of being approved for your mortgage.