Getting a better mortgage might not be as hard as you think. One major factor that determines if you qualify for a loan is your debt-to-income ratio. That’s not as complicated as it sounds – check out our article if you want to figure out your debt to income ratio – but basically it means your income and your debt, or credit, are the major factors in what kind of loan you can get.
What’s nice about that is there are simple ways to help your credit that will ultimately help you get a better mortgage! Here’s a few of our best easy, everyday tips to a better mortgage:
- Avoid too much, too quickly. Opening too many credit cards will lower your credit score. Why? Because every time you get one, your social security and credit check will show up on your credit report. The more inquiries you have in a short period of time, the more it lowers your credit score. That includes even the department store cards that seem so handy. So if you’re planning to apply for a loan, be aware of how many credit cards you have, and how recently you opened them, before you consider opening another.
- Don’t panic and close them all. If you read the above and want to overcompensate, hold up. Lenders are looking for you to be using 30% or less of your credit limit – it shows responsibility. If you close a lot of cards at once, it could move you from using well under 30% of your available credit to well over. Having the credit available to you doesn’t actually hurt you – but if you still would like to close some of your cards, try closing one every six months or so.
- About Deferring Student Loans… What most people forget is that even though your loan is deferred, a lender still has to consider it because it is a payment that you will be making in the future. So keep that in mind.
- Avoid big purchases. Don’t take a loan out for a car right before you are looking to buy a house – try to wait until after. Making big purchases will raise a lot of questions when lenders look at the flow of money in and out of your accounts.
How to look good:
- Become an authorized user. Being an authorized user on the card of someone who has good credit can dramatically help yours. This is often a great option for young people who are looking to build credit, who become authorized users on their parents’ cards.
- Don’t be late. Make your payments on time – it really matters to lenders. In the mortgage world, a standard is that if you have been over 30 days late to make a mortgage payment, you have to wait a whole year to refinance or purchase.
You’re well on your way to getting a better mortgage already! Give us a call – we’d love to help you figure out the best course of action for you and your family when it comes to mortgages.
The Christian Mortgage Mom