AT be eligible for a mortgage, you usually have to meet certain requirements. On the one hand, you will need:
- A sufficiently strong credit rating
- A reasonable and not excessive level of existing debt
- A stable job
- Funds for a down payment
A lot mortgage lenders tightened their borrowing needs during the pandemic. After all, mortgage lending comes with risk, and lenders need to make sure they are working with borrowers who are likely to continue to pay off their home loans.
In May, mortgage lenders relaxed borrowing requirements, and credit availability has increased from its April level, according to the Mortgage Bankers Association. This made it a bit easier to qualify for a mortgage. But in June, the availability of mortgage credit fell 8.5%.
If that percentage sounds like a lot, well, it is. The level of mortgage credit availability in June is the lowest since September 2020. And that could make it more difficult to to buy a house Short term.
How to give yourself a better chance of getting a mortgage
Just because the availability of mortgage credit declined in June doesn’t mean your chances of borrowing are ruined. If you are a good candidate, you may not have any trouble getting approved for a home loan.
Yet before you apply for a mortgage, there are steps you can take to increase your chances of getting approved.
1. Improve your credit score
Your credit rating indicates how much of a trustworthy borrower you are. Generally, you need a minimum credit score of 620 to get a conventional mortgage. But now that lenders are getting stricter, a score of 620 may not be enough.
It pays to work increase your credit score. A better score not only increases your chances of getting approved for a mortgage loan, it can also help you qualify for a low. interest rate. You can increase your credit score by:
2. Get rid of your debt
Your debt to income ratio is another metric lenders use to see if you qualify for a mortgage because it measures your existing debt relative to your income. If your ratio is high, it sends the message to lenders that you are already spending a large portion of your income on debt securities and may not be able to cope with a mortgage if you are approved for one. Paying off debt is the best way to lower this ratio.
3. Make sure you have a solid deposit
The more funds you have for a advance payment on a house, the less you will need to borrow. And the less you borrow, the less risk mortgage lenders take. It might pay for start side work for a few months. This way you can use your income to help yourself save for a down payment.
While lenders may have gotten tougher with borrowing requirements in June, that doesn’t mean you’re destined to have your loan. mortgage request refused. At the same time, it’s worth doing whatever you can to increase your chances of getting the loan you want and at a rate that makes it easier to manage your monthly payments.
A historic opportunity to potentially save thousands on your mortgage
There is a good chance that interest rates will not stay at multi-decade lows any longer. That’s why it’s crucial to act today, whether you want to refinance and lower your mortgage payments or are ready to pull the trigger to buy a new home.
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