In recent times, mortgage interest rates are rising as the Federal Reserve is slowly increasing the interest rates. People who are looking to buy a new house have realized they need to act soon, or they might be paying more interest every month.
Buying a new house, however, is not as easy as finding a new home and cracking a deal with the seller. You still need to secure a mortgage. And while it seems pretty easy to do, it can be challenging for many new homebuyers. Especially, those who are unprepared.
If you want to improve your chances of getting a mortgage with favorable terms, you should take a few steps as soon as possible. While there’s no quick fix or easy way to change your income or the length of your credit history, you can do a few things before applying for a mortgage from the perfect mortgage loan solutions bank. Following the below-given steps will make it easier for you to apply for a mortgage loan and will increase your chances of securing a mortgage.
#1 Know your documents ready!
When you apply for a mortgage, most lenders will want a standard package of documents. These documents include your recent years worth of tax filings. You also need to have at least three months of bank account statements, and you will need to have documents to explain any unusual large withdrawals or deposits.
#2 Know how much you can spend
Most lenders follow the 28/36 rule. That means your monthly payment on your mortgage must not be more than 28% of your gross salary. And your total debt payments(including your potential mortgage, car loan, or any other monthly installment) must not be more than 36% of your gross income. But, the mortgage loans solutions partners don’t necessarily follow these rules. It’s always good to follow the 28/36 rule, as it will increase your chances of getting a mortgage.
#3 Increase your credit score
One of the critical factors in determining whether your loan will get approved or not, and what rate you will pay is your credit score. It’s important to know what your credit scores are from the three main credit bureaus, and you can get that information in many ways.
There are paid services that offer detailed credit reports, and many credit card companies offer their customers free credit scores. Once you get to know your credit score, few things can help raise your credit score.
The first thing is to make sure that there are no mistakes or errors in your credit report, and complain if you find any error. Second, if you have some loan balance that you can pay off, pay it, this will raise your credit score. Aside from that, there are little things you can do, like avoid opening any new accounts or taking new loans or do anything that needs a credit check.
These are the three things that you should do before applying for a mortgage. Make sure that you follow these three tips to ensure that the bank approves your mortgage and that you get to buy your dream house.