If you're planning to buy a home, be it your first or second home, and you're planning to apply for a mortgage loan, there are several things you have to have or do to ensure your qualification. A lender looks at several factors, particularly how much you can actually afford to repay, as well as your existing credits and financial records.
Here are three of the important things you should do that will help you increase your borrowing capacity:
Consolidate your debts
Lenders will surely look at how much money you already owe, so before you apply for another loan, do your best to pay off most, if not all, your existing debts and close some of your credit card accounts. The more debts you have, the lesser chance you have to get approved. You can also consolidate your smaller debts into a single loan which can help you save and manage your budget better.
Improve your credit rating
Credit rating can make or break your ability to secure a mortgage loan for your dream home, so it is important to build a good credit rating as early as now. Paying your bills on time, using your credit card regularly and responsibly, and being stable are just some of the things you can do to improve credit rating. Those who have credit scores of not lower than 700 are reportedly easier to approve.
Save more, spend less
Having at least 20 percent deposit will help you look better in the eyes of most lenders, according to YourMortgage.com. Lenders will also consider your spending activities which include your living expenses such as utilities, childcare costs and lifestyle. With that, you may want to reduce your expenses. There are several mobile applications you can download from App Store and Play Store to help you track your outgoing money and analyze which ones you can cut.
