When mortgage rates started dropping last year, buyers rushed to purchase new homes. If you attempted to do the same but were rejected, there a few moves on your part that could help you become a homeowner by the end of the year.
1. Boost your credit score
If your credit score needs work, you can raise it by paying all your incoming bills on time. Your payment history is the single most important factor in calculating your score, and being timely for many months in a row will help.
2. Shed some existing debt
If your monthly debts are too high relative to your monthly income, a mortgage lender may reject your home loan application. As such, paying off some existing debt will make you a less risky borrower. If you manage to pay off some credit card balances, your credit score may increase, too.
3. Clean up your credit report
Check your credit report for errors that could be working against you, such as a severely delinquent debt you've since settled. Keep in mind that some items, like a bankruptcy filing, aren’t actionable and will stay on your credit report for up to 10 years. Focus instead on items you can change, like legitimate collections debt that you can work to pay off.
4. Boost your cash reserves
The more assets you have, the more comfortable a lender is to give you a loan, and the less money you'll need to borrow. In the coming year, cut back on spending or take on another job to boost your savings. This could allow you to make a larger down payment on a home, or show a lender that if you were to lose your job, you'd have emergency cash to keep up with your monthly payments.
5. Secure a steady source of income
Mortgage lenders have been strict about approving applicants with variable income. This doesn't mean you won't get approved for a home loan if you're self-employed. But if this has been a set back it could help to secure a more stable income. You don't have to give up your freelance lifestyle and take a salaried position, instead aim to get some of your clients to sign contracts so you can present proof of ongoing work.
Interest rates are once again on the rise, so take action today. Give us a call and we’d be happy to discuss your options.