Steps to Scoring a Mortgage

Getting a mortgage - Piece of Cake; or Is It?

If only mortgages were easy to get! It is everyone’s dream to walk away with a mortgage in a jiffy. But in reality, it does not work like that. It can be pretty tough to get a mortgage. There can be several things that are capable of being an obstacle. These include low credit score, insufficient income level, too much debt, and inadequate downpayment.

However, they are not unsurpassable. 

In this blog, we are going to help you in overcoming these. Here’s how you can do that.

Repair and Increase Your Credit Score

You could be a model from a top beauty magazine or an enthusiastic entrepreneur with grand lifestyle plans, but lenders won’t pay a penny if your credit score is poor. Only the credit score matters!
If your credit score is high, you can get the best loans, but if it is too low you may not get a single one. However, if your score is low, don’t worry. There are ways to raise it. It may not be immediate, but it shall be sustainable.
For instance, if your credit score is lower than 630, lenders may not entertain you at all. Score downwards from 620 are considered subprime. Few lenders shall give loans at such a score.

Now, in the rare case in one does get a loan despite having a poor credit score, it is no matter to celebrate. The problem is that such loans come with high rates of interest and other unfavorable terms. A person takes such loans when he or she has no choice.

Ideally, you should aim to have a credit score of 740 or above. In such cases, you can get a mortgage and other loans at highly favorable terms and conditions. For instance, you’ll get the best or lowest interest rate.

Here are the ways to raise and repair your credit card score. You can do this by paying off your loans, by using your credit card less and your debit card more, by paying bills on time each month, and by finding and correcting errors on your credit report. 

However, do understand that not every problem in your credit report and credit score can be repaired quickly. Some take as much as 7 to 10 years. These include collection accounts, foreclosure, charge-offs, and very late payments. 

Additionally, if you are about to apply for a mortgage or are thinking of investing in one, do not take any new credits. Applying for new credit lowers your credit score, as taking too much credit at the same time is a warning sign to the lenders. They believe that, as you can many loans available, you may not be able to make the mortgage payments after a time.

Get a Job That Pays You More

Sometimes, lenders may say that your income level is not high enough to get the mortgage. In such cases, start by asking them how much more is needed. You can then ask at your current company if your salary can be increased. 

Lenders prefer higher salaries as it means that you are more likely to repay the mortgage and not default. They want to see that you have steady employment. It is better to not change professions while having applied for a mortgage.

Switching professions may bring more salary increase, but lenders discourage it. What you can do instead is switch companies in the same industry or profession. You may not be able to get a raise in the current job, but a new employer may have more to gain by absorbing you.

If switching companies night now is not viable, there are other things you can do to be more valuable at the current company. You can upgrade your skills and take a role with more responsibility, and hence a higher salary. Get help from a career counselor to help in increasing your marketability and reach your income goals.

Part-time jobs are not taken into consideration by lenders as they are seen as temporary. Mortgage repayment takes at least 15 years. What lenders are looking for is long-term income stability.

Start Saving Like Crazy

When you have a mortgage to pay back, you can’t spend like crazy. You’ll have to save up a lot. Till you pay back, you may have to live a frugal life. To start with, start making a list of things you can do to maximize your savings. Are you getting secondary or recurring income from somewhere? If so, can you increase that amount? A mortgage may seem tough to pay back when your cash inflow is low. However, it is not impossible. 

To Sum Up

We’d like to end by saying that it is not easy to get a real estate mortgage. Sometimes, lenders set a high bar which you must pass to get approved. However, it is not impossible either. If you follow these tips above, your journey to get a mortgage should be easy.

Want to make it way easier? Apply for a home loan through mymoneykarma right away!