If you are a first-time buyer, then you should not panic. There are lots of ways that help you to improve your chances of approving a mortgage. Nowadays it is not hard to meet the financial requirements of the mortgage brokers for new borrowers. At Alpha Mortgage we start renewing your mortgage 5 months from the date of maturity. Below is the list of ways that will increase your chances for approval of a mortgage.
- ● Improve credit score –
Mortgage lenders check your credit history in your report to know whether you are qualified for a loan or not and, if qualified, then at what rate. If the history of your credit card is good, then the bank will help to increase your credit card limit even if you don’t want it. By this, they can earn more interest if you spend more money. According to people, it is a good sign, and you can be qualified for such an amount. But we suggest that you should have the lowest amount on your credit card, which will increase your power to borrow. You can then increase your limits temporarily if you need. It helps you to improve your credit score. You should also remember to check your credit report from time to time so that you can know how much money you spend.
How can you improve your credit score?
- Clear your bills on time- one of the best ways to improve credit score is to clear all your bills on time. Any kind of late payments or default can impact your score negatively.
- Apply for accounts that are required – If you have too many loans, then your score will decrease, so you should not take credit on anything that you cannot payback.
- Use revolving credit – you should use credit cards that have low balances that you can easily pay off. It is one of the best ways to improve your credit.
- Paying off debt – Paying off debt is also the best way to improve the credit score.
- Increase credit score
While checking your credit reports, you should not presume its accuracy and instead observe it and try to find the error so that you can correct it. There are a few things that you should look closely at as you should make sure that the debts are paid, any information that is not yours, any kind of identity theft, any information that is out of date, incorrect notations in the closed accounts. You must check your credit report every four to five months to avoid any problems and make sure the error is corrected.
- Credit score for a mortgage
When they summarise the history of your credit report and pay off debts and bills, the single number on your credit score is used to evaluate by the lender to check the credit risk and try to determine how much time you will take to repay loan payments.
- Payment history – 35%
- Length of credit history -15%
- Amounts owed -30%
- New credit -10%
- Credit mix – 10%
So, the higher the credit scores, the better chances of approval of low mortgage rates. It depends on you how you keep a high credit score. It can be by paying off debts, paying bills on time, the amount of debt reduced, keeping payment reminders. In short, don’t use your credit card.
- Reduction of debt to income ratio
Mortgage brokers use debt to income ratio before giving a loan. This method is calculated to compare the monthly debt you carry to your monthly income. This way they can determine how much to give. If your debt to income ratio is low, then you will get higher mortgage rates, but if it is high, then you won’t be qualified. So you can do two things—first is to increase your monthly income and second is to reduce the debts you have. You can reduce debts if you buy less. There are different ways to save your money. You can do overtime or do some other job temporarily.
- Focus on liquidating your existing debts
Mortgage brokers will try to know about your debt repayment before deciding whether to give you money or not. They will check your income and debts and then estimate whether you can cover the mortgage payments or not. The debt you have will impact how much money you can borrow, so you must liquidate all your existing debts. For maximizing your mortgage affordability, you will have to focus on growing your income and paying off all your debts. In short, for more mortgages, you need to have higher income and low debt. In case you are unable to increase your income, you need to pay off all your existing debt as much as you can.
- Planning about the future
You must calculate how much you can afford so that you can continue to search for properties that are in your range. This will help you to save time, and you won’t be disappointed. After you minimize your debt and calculate how much you can afford, you need to consider the additional expenses you will face such as legal fees, home inspection, provincial sales tax (under 20% down payment on mortgage insurance), land transfer taxes, title insurance, etc. You can make a clear plan for the mortgage which you want to buy. By analyzing all the best alternatives you can choose those which suit you.
- Educate yourself on the process of the loan
You must know about the loan process so that no one takes advantage of you. You must be aware of all the transactions and bills so that you can minimize your cost. Instead of finding the right broker for a mortgage, you should focus on knowledge related to the mortgage process like the interest rate of the mortgage.
Lastly, you need to focus on the key points and have a proper planning structure before you take a mortgage loan.
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