If you have decided you want to take out a home loan and you aren't sure if your finances are in a good enough state to purchase a house, there are a few things you'll want to look into. It can be difficult to get a mortgage if you haven't been financially responsible in the past and if you aren't good at making payments on time.
Your credit score is going to have a big impact on whether or not you can get approved for a home loan, but some other factors will apply as well. Here are a few financial things to look at.
Debt to Income Ratio
Your debt to income ratio can be more important than your credit score when it comes to getting approved for a mortgage. This is the total amount of debts you have added together, in comparison to the amount that you bring in annually. If you are looking to get approved, you may want to pay down the balances on your auto loan, credit cards, or other debts that you have.
Longest Standing Accounts
Mortgage lenders like to see that you have long lending history with a specific company, or that you have been able to keep an account open for months or years. If you don't have anything on your credit report that shows you're trustworthy in the long term, you may want to find a company that you have had an account with for years that doesn't report to the credit bureaus, and have them write a letter about your account.
It's ideal to show the bank that you have 2 months of mortgages or more in a savings account, so you aren't going to default when you have to pay the loan monthly. If you can show that you have more than that, and that the likelihood of a default is minimal, it can improve your chances even if your credit score isn't the best.
There are some lenders that will give mortgages to people who don't have the highest credit scores; you'll just have to expect to pay a higher interest rate. If you are interested in investing your money in real estate and you want to purchase a home, don't let your less than perfect credit score hold you back. Instead, look at these different factors and use them to your advantage to get the lender to award you the mortgage. For more information, contact a company like Financial One Mortgage.