How to Get Your Credit Ready for a Mortgage

Planning to buy a home soon? If so, there are many steps you need to take to ensure a successful buy. The first and most important step is to make sure your credit score ready for a mortgage. Continue reading for expert help and tips!

Check Your Credit Report & Scores

Checking your credit report and scores is important. Knowing where you are at will help give you a better idea of where you want to be and what options you have available. The two main credit bureaus you want to look at are Equifax and Transunion. Upon checking your credit, you want to look at any past-due accounts, charge-offs, accounts in collections, existing loans, credit accounts, credit card balances, or any inaccurate information that need to be disputed.  Ideal credit scores are anything between the mid-to-upper 700 range. In general, credit scores that fall within that range are more than likely to get the best loans or loans with low interest rates. If your credit falls below that range, don’t fear, you may still be able to secure a loan. Reach out to a local expert loan consultant for help and guidance. They can help you improve your chances and guide you throughout the process.

Pay Your Bills on Time & Reduce Debt-to-Income Ratio (DTI)

Your payment history is one of the most significant factors in determining your credit score. Those who consistently make payments on time have a higher chance of securing. If you’re payment history isn’t ideal, don’t be disheartened.  Your credit score isn’t set in stone. There are many different ways to rebuild and improve it. For starters, you can repair it by making efforts to staying on top of your payments now and in the future. Overtime, it will improve, and things will start looking up so don’t you worry. Put the work in now and it will pay off.

Next, you want to work on reducing any debt-to-income ratio (DTI). While your DTI isn’t technically a part of your credit score, lenders are more likely to approve a loan to those with a DTI less than 50%. There are several ways to lower your DTI. You can lower it by using the debt snowball methods or by paying off any credit card balance you may have accrued.

Limit Big Purchases

Paying your bills on time and managing a good debt-to-income ratio (DTI) is a great way to improve and maintain your credit score. Another great tip is to limit yourself from making any big purchases. Avoid putting large payments throughout your application process and especially before submission. It will not only make it hard to save up, but it can ultimately make lenders second guess your qualifications. You want lenders to know you have a reserved save and spending any money on high-price tag items will show them otherwise.

Save up for a Down Payment

Having a decent down payment is used to determine your eligibility and loan terms. A minimum payment requirement for conventional down payments falls between 3-5%. And while you can shoot for a something within that range, you’ll have a better chance of getting approved with a low interest rate with the more money put down. Ideally, you want to save somewhere close to or even above 20%. The more you save now, the better you’ll do in the long run.

Need the help of a Mortgage Consultant?

The loan process can be overwhelming, but with the right help you can get it all sorted out and squared away with ease. If you’ve found the information above helpful, but still need a little more help and guidance, don’t hesitate to reach out to one of our team members. At Community Mortgage, we are committed to helping homebuyers secure their dream home. We do this through open and communication. We value educating our clients throughout the entire mortgage process, so they know exactly what is going on, what they need to do, how to do it. Your success is our success.