You have worked hard for years, and it’s finally time when you can think of your home. Getting a mortgage for your new investment might be more complicated than you imagine. With changing dynamics of real estate and fluctuations in economy, lenders are more concerned with mortgages. If you want to maximize your chance of getting a mortgage, here’s a list of things you can do.
Check and fix your credit report (if required)
Expectedly, lenders will be concerned about your credit score, which should be 640 or more in the ideal case. Check your credit report and find the pointers that are causing adverse effects. Also, don’t assume that the report is completely okay. Check if debts discharged have been included, and if there are other mistakes. Also, it is a good idea to evaluate if the score can be improved. If you start early, it is possible to pay off a few debts. You can explore websites like OnQFinancial that offer information on mortgages and also have a mortgage calculator.
Focus on debt to income ratio
As the name indicates, debt to income ratio considers debts as compared to your monthly income. The debt-to-income ratio is extremely important, because it allows lenders to decide if you can smoothly manage to pay the mortgage payment. Traditionally, debt-to-income ratio shouldn’t be more than 36% in the ideal case, but lenders can consider up to 41% depending on certain factors. Secondly, the payment for mortgage shouldn’t more than 28% of that debt each month. This brings us to the question – can your improve debt-to-income ratio
Yes, that’s possible, but it may require considerable reshuffling of your financials. First and foremost, you have to reduce your recurring debt each month. This is easy to understand on paper, but in practice, you have to cut down costs and expenses considerably, so as to maximize savings. The second aspect is about increasing income, which might not be practical for a lot of people, but if you want to consider that, try and find a second job or earn more from your existing job by working for extra hours.
Get the paperwork ready
Most people don’t realize that paperwork is necessary for getting the mortgage. Make sure that you have all the documents together, and if you are self-employed, you might have to toil a lot more to prove that you are capable of affording the mortgage.
Do the initial homework, find what works for your budget and whether you want to spend on the selected property in the first place.