Securing a mortgage requires good credit, healthy finance history

RIVERSIDE COUNTY – Real estate professionals say the market is rebounding, and many would-be home buyers are eagerly awaiting their opportunities to purchase their own homes. Fresh data indicates that the inventory of properties is quickly drying up and soon the market is poised to point in the sellers’ favor.

According to Allen & Associates, a real estate appraisal, consultant and research firm based in Colorado, properties in the area listed for sale are below the six-month supply of inventory. Now could be the time to get a good deal on a home, provided buyers are able to secure mortgages.

No matter how many affordable homes are available, if a buyer cannot get approved for a mortgage, then his or her chances of owning a home are slim. In the wake of a tumultuous economy, many lenders tightened restrictions on mortgage lending. And even though the economy has rebounded, many lenders have continued to follow strict guidelines before lending money. In order to secure a mortgage with a good interest rate, buyers must take control of their financial situations and fix problems that could lead to loan rejection.

Many things can impact a mortgage application. Here are the ways to overcome liabilities and improve your standing with prospective lenders.

Know your credit rating. Your credit rating is a score that lenders rely on when deciding whether or not to approve your mortgage application. The higher the credit rating, the more attractive you look to prospective lenders. But the lower your score is, the more difficulty you will have getting a loan.

Should you get a loan with a low score, you may have to pay a higher interest rate than someone with better credit. Prior to making any big financial decisions, such as applying for a mortgage, it is vital to find out your credit score. You can request a free copy of your credit report, which includes your credit score, once a year from the three major credit reporting agencies in the United States and Canada: TransUnion, Experian and Equifax. You also can pay for your credit report.

Address any issues on your report. Once you know your score, you can take steps to address any issues on the report. Pay down revolving consumer debts, such as credit card balances and auto loans. Report any errors on your credit report so they can be adjusted. Pay bills on time and address any notices of collections before they make it onto your permanent record. If you will be applying for a loan soon, avoid opening any other credit accounts for the time being.

Maintain steady employment. Having a job is often vital to getting a mortgage. Lenders tend to look for long-term financial stability, which is best illustrated by maintaining steady employment. Jumping from job to job may be a red flag to lenders, so it’s better to make a switch after you have been approved for a loan.

Save, save, save. Having more money in the bank lowers your loan-to-value ratio, or LTV. This will make you appear less risky to lenders. Individuals who have saved for a considerable down payment on a home are also seen in a better light.

Make sure you have a credit history. Some people are too cautious with their credit and think closing accounts or avoiding credit entirely will make them more attractive to lenders. But this can backfire. Lenders will want to see a strong credit history that indicates your ability to pay your debts on time.

Get a cosigner. If you are uncertain about your ability to secure a loan on your own, then consider a cosigner to make you more attractive to prospective lenders. The cosigner helps guarantee the lender that your mortgage payments will be made.

People looking to buy a home in the near future must make themselves attractive to mortgage lenders, many of whom are still reluctant to approve loans for candidates without strong financial backgrounds.

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