TO be eligible for a mortgageusually you have to meet certain requirements. First, you will need:
- Strong enough credit rating
- Reasonable, not excessive level of existing debt
- Stable work
- Advance payment funds
Many mortgage lenders tightened their borrowing requirements during the pandemic. After all, there is a risk associated with lending mortgages and lenders need to make sure they are working with borrowers who are likely to continue paying off their home loans.
In May, mortgage lenders relaxed borrowing requirementsand credit availability has increased since April, according to the Mortgage Bankers’ Association. This made it a little easier to qualify for a mortgage. But in June, the availability of mortgage loans fell by 8.5%.
If that percentage looks like a lot, well, it is. The availability of mortgages in June is the lowest since September 2020. And it can make it difficult To buy a house in the near future.
How to get more chances of a mortgage
The fact that mortgage availability declined in June does not mean that your chances of getting a loan are diminished. If you are a strong candidate, you may have no problem getting a mortgage.
However, before you apply for a mortgageThere are steps you can take to improve your chances of getting approved.
1. Improve your credit score
Your credit rating talks about how trustworthy you are the borrower. Typically, you need a minimum credit rating of 620 to get ordinary mortgage… But now that lenders are getting stricter, 620 may not be enough.
To work on improving your credit rating… A higher score not only increases your chances of getting a mortgage, but can also help you qualify for a lower loan. interest rate… You can improve your credit score by:
2. Get rid of your debts
Your debt-to-income ratio This is another measure that lenders use to determine if you are eligible for a mortgage, as it measures your existing debt in relation to your income. If you have a high ratio, this sends a message to lenders that you are already spending most of your income on debt obligations and that you may not be able to handle your mortgage if you are approved. Paying off your debt is the best way to lower this ratio.
3. Make sure you have a solid down payment.
The more funds you have for an initial fee at home, the less you will need to borrow. And the less you do, the less risk your mortgage lenders are at. It can pay start a part-time job for several months. This way you can use your earnings to help you save on down payment…
While lenders may have tightened borrowing requirements in June, this does not mean that you are destined to receive mortgage application rejected… At the same time, it is beneficial to do your best to increase your chances of getting the loan you want and at a rate that makes it easy to manage your monthly payments.
Historic opportunity to potentially save thousands on mortgages
Interest rates will likely not stay at multi-year lows for much longer. That’s why taking action is critical today, whether you’re looking to refinance and cut back on your mortgage payments or are ready to pull the trigger when buying a new home.
We strongly believe in the Golden Rule, so editorial opinions are ours alone and have not been previously reviewed, endorsed or endorsed by included advertisers. Ascent does not cover all offerings on the market. The Ascent’s editorial content is separate from The Motley Fool’s editorial content and is created by a different team of analysts. disclosure policy…
The views and opinions expressed herein are those of the author and do not necessarily reflect the views of Nasdaq, Inc.