During the pandemic, many mortgage lenders became more strict about granting home loans. The logic was that they had to protect themselves at a time when unemployment was rampant and economic uncertainty abounded.
But last month, the availability of mortgage credit increased, according to the Mortgage Bankers Association. This means that it has become easier for borrowers to qualify for a mortgage.
If you are looking to buy a home for the short term, this is clearly good news. But you will still have to put in a lot of effort to market yourself as a good candidate for the loan. Here are the steps you will need to follow to do so.
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1. Have a good credit score
You will need a minimum credit score of 620 to qualify for a conventional home loan. But some lenders may require a higher score to get approved for a mortgage. And if you manage to get your score in the mid-700s or so, you could get the best mortgage rates available.
If your credit score needs a boost, make sure you pay all incoming bills on time and see if it’s possible to pay off some of your existing credit card debt. This could directly benefit your score. It also makes sense to check your credit report for errors. Correcting mistakes that are unfavorable to you could increase your score quite quickly.
2. Have a low debt ratio
Your debt-to-income ratio measures the amount of your debt compared to your monthly income. The lower it is, the more likely you are to get approved for a home loan. Paying off existing debt is the fastest way to lower your debt-to-income ratio. And if you’re going to pay off debt, target your credit card debt, as that could improve your credit score as well.
3. Have a stable job
You will need a reliable source of income to qualify for a mortgage. If you are new to your job, you may want to wait a few months before applying for a mortgage. That said, if you’ve recently gotten a new job in an industry you’ve been working in for years, a lender may not blame you for not being around for a long time. However, you may be asked to provide a letter from your employer stating that your employment is stable.
4. Have money available for a down payment
Some mortgage lenders will only take a 5% down payment when you buy a home, but you usually need more than 10% to take out a home loan. And if you can’t close with a 20% down payment, you’ll have to pay for private mortgage insurance, an expensive premium that makes owning your home more expensive.
If you don’t have a lot of cash available for a down payment, you may want to consider other loan programs that allow you to buy a home with less down payment. These include:
But it might also be beneficial to put your home buying plans on hold until you’ve saved more money. If you make a minimum down payment, you will need to take out a larger mortgage (which means higher monthly payments and higher interest charges), and it will take much longer to build up your equity. House.
It might be a little easier to qualify for a mortgage, but you still need to market yourself as a prime candidate. Follow these steps to get the financing you need to buy your own home.