Boosting Your Qualifications for A New Home Mortgage
Published July 27, 2020
We currently enjoy a historically buyer-friendly market due to low mortgage prices and affordable housing. But even then, an affordable mortgage doesn't happen by mere circumstance. To make sure that you can get the best deal when financing your home payments, you should follow a few simple tips to improve your chances of getting a great deal on a mortgage that meets your needs.
Earn a Better Credit Score
When you apply for a mortgage, you can boost your chances of getting a better loan by having a better credit score. Also known as a FICO score, your credit score ranges from 300 to 850, indicating how likely you are to repay debt. Anything below 600 is considered a poor score, while a score above that is considered very good. For the best results, you should aim to have a score of 750-850.
The simplest way to improve your credit score is to repay as many of your debts as possible. There are a few easy ways to manage this; for example, you can apply your tax refund to your mortgage. You can potentially even enhance your credit score by replacing your credit card debt with a personal loan. You should also request your free credit report from AnnualCreditReport.com, where you can correct any errors in your credit history to raise your score instantly.
Improve Your Debt-to-Income Ratio
Another thing you can do to appeal to lenders is to lower your debt-to-income (DTI) ratio. You can calculate this ratio by dividing your debt monthly debt expenses by your monthly income. For example, if you make $2,000 per month and have to pay $1,000, then your DTI is 50%. In general, lenders prefer a DTI of 43% or less. You can improve your DTI by paying off your debts or increasing your general income whenever possible.
Choose Between a Fixed and Adjustable-rate Mortgage
One other action you can take to boost your qualifications for a new mortgage is to choose between a fixed-rate and adjustable-rate mortgage. Your monthly interest rate is the primary difference between these two mortgages. In a fixed-rate mortgage, your monthly payment never changes after you take out your loan. An adjustable-rate mortgage, meanwhile, can change over time: it might start at a lower price, but it can become more expensive later on. There are pros and cons to both options, so be sure to consult with a professional mortgage broker to determine the choice that works best for your circumstances.
Why Choose Big Life Home Loan Group?
Improving your qualifications for a mortgage can feel overwhelming. But at Big Life Home Loan Group, we have a team of experienced professionals who know the ins and outs of qualifying for mortgages and financing homes. We've helped countless people qualify for their dream homes, and we're ready to assist you next.
Contact Big Life Home Loan Group Today
Let us guide you through the mortgage process. Contact us today to speak with one of our friendly mortgage experts.