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We’re not living in the best age for finances. It seems like just as we were starting to feel like we were recovering from the 2008 crash, we were hit with worldwide lockdowns and an economy crash and look how that’s been overshadowed.
All of that is to say that things have gotten expensive. Energy, fuel, and, of course, housing. There is a lot of competition out there for any quality homes with a low price tag. If you find that jewel of a potential home, the place you see growing old in, maybe raising a family or raising a fur family, then you need to get it quickly.
There is nothing worse than seeing that dream home and finding that you can’t get it because you’ve been knocked back. We’re going to help you make sure that doesn’t happen. Take a look at our guide to making sure you get approved for buying a property.
It’s an unfortunate truth that the first thing any lender you approach is going to look at is your debt-to-income ratio, or DTI. Your DTI determines how much of your monthly income is going towards the minimum payments to pay off your debt.
As counterproductive as it might sound, you’ll need to start paying more. The longer your debt stays in your account, the more interest it will gain, making it harder to pay off. Start by paying more than the minimum monthly amount offered.
If you have some injection of income, put it towards your debt first. Debt gets in the way of just about every other financial decision, so make a lot of other issues easier by getting rid of your debt.
You can see about getting rid of your debt by looking into a balance transfer card, that will collect all your debt into one account with no, or little, interest, making repayments a lot easier. Or you can look into refinancing an auto loan.
Something that can go a long way to helping you purchase your property is getting pre-approved. You must first get pre-approved for a mortgage in this competitive market. It’s the best way to stand out from the crowd by showing that you are a serious buyer, ready to move quickly, and another lender has deemed you worthy of the ability to buy a home.
The process of getting pre-approved is very similar to gaining a mortgage, only there’s no property at the end of it. You can get pre-approved with the use of various documents to prove you’re eligible, including proof of income, credit report, bank statements, proof of funds for a down payment, and tax returns.
You can speed up the loan approval process this way, but pre-approvals tend to expire in 60-90 days because your circumstances may have changed in that time. It’s best to pursue a pre-approval around two weeks before you start looking at homes to give your lender time to review your circumstances.
If circumstances allow you should add a co-borrower to your mortgage loan. That way, more than one income will be able to cover the mortgage repayments and your lender will feel a lot more comfortable loaning to you.
A co-borrower can be a spouse, domestic partner, a friend or a relative, but the best candidate is someone with good credit and a steady income, which will convince the lender that the two of you can handle a bigger loan.
You can greatly increase your borrowing power by pointing out any and all income that you are currently getting when applying for a mortgage. You might think that your usual 9-5 salary is all you have, but you’d be surprised what lenders consider income. This can be alimony or child support from a previous marriage, income from a rental property, dividends from investments, social security income, or money earned from a part-time job or side business, although the latter two come with the asterisk that you must have been earning from the job or business consistently over the past two years.
Thankfully, a good chunk of improving your credit score is wiping away your debt, but there are other things you can do to help boost it.
Your lender is likely to look at your credit score as an indicator of whether or not you are a reliable person to loan to. If you have a history of repaying your bills on time and in full regularly, a high credit score will indicate that.
If you simply don’t have any credit history, you can build credit with a credit builder card. They will have low spending limits and high interest rates and will allow you to slowly build your credit score. Beyond that, it’s more a matter of staying on top of payments, not missing one and allowing your credit score to build over time. Keep your old accounts open and avoid opening new ones to provide proof of a long history for banks to refer to.
You can use a credit monitoring service to track your progress, so that you know you are on the right track. A lot of them are free and they look at your credit report and monitor any changes as well as presenting you with your score, courtesy of the likes of Equifax, TransUnion or Experian.
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