There are many factors that can prevent you from qualifying for mortgage financing. The main ones include poor credit score, insufficient down payments, low income and too many debts. Luckily, there are certain things you can do to convince a mortgage broker to accept your application.
1. Improve Your Credit Score
Credit score is one of the factors that high risk mortgage lenders consider when determining whether you qualify for a mortgage or not. The lender will use your credit history to know whether you are capable of paying back the loan as agreed. To know your credit background, the lender will check your credit history to how you have been repaying your loan and whether you have any outstanding loan. He will also check to see if you have exceeded your credit card limit.
2. Increase Your Down Payment
The least amount needed for a down payment when purchasing a home is about 3.5 percent of the total value of the house targeted. This down payment will allow you to qualify for federal housing administration loan. The federal housing administration loan is a great option for you if you cannot come up with a huge amount of money. It also does not charge high interest rates on the defaulters. It is important to note that when you are buying a home, you will not only need money for down payment, but you will need some cash for settlement charges.
To increase the amount you can afford as a down payment, you should increase the amount that you save. You can sign up for part-time jobs to increase your savings.
3. Increase Your Income
This is also another important factor you should consider. Your lender will check your income and compare it with the amount you spend on fixed assets. A lender will only consider you when you spend less than 50 percent of your gross monthly income on fixed assets such as mortgage payment, association dues, car loans, student’s loans and property taxes.
4. Reduce Your Debts
The last thing you are supposed to do is to reduce your debts. If your monthly debts are so high to an extent you cannot afford to repay them, lenders may not consider you qualified for a mortgage. They fear you will not be able to repay the loan as required. However, there are some lenders who offer bad credit mortgage refinance services.
It is not easy to qualify for a mortgage. Lenders often consider a lot of factors when determining qualifications. But with the tips discussed above, you can increase your chances of qualifying for a decent mortgage. There are additional resources available at Street Capital if you are interested in learning more.