If you are looking to buy a house, you might be wondering what you can do to improve your chances of getting a good loan with a good interest rate. Qualifying for a home loan is quite the process, which is why it is important that you know what you are doing before you start. Here are some tips to help you get the best home loan possible.
1. Pay Down Your Consumer Debt
If you have the choice between saving and paying down debts, you should pay down your debts, at least while you are trying to buy a house. But this doesn't mean that you shouldn't have some sort of emergency fund. Many experts recommend you have $1000 in emergency funds ready, but then the rest should go to paying off debt. This is because one of the main numbers lenders will use when determining how much house you can afford is your debt to income ratio. If you are carrying a high balance on your credit card, you have car payments and student loans, you are going to have a really hard time getting approved for a loan. Each dollar that you owe monthly in debt repayment will be a dollar taken away from what you can afford on the house. This is why it is so important to pay off that debt as quick as you can.
2. Don't Take Too Many Deductions On Taxes
Your taxes are going to help prove how much money you make each year. This is especially the case if you are self-employed. When the mortgage lender looks at your taxes, they won't look at your net income. Instead, they will look at your adjusted gross income or you AGI. This can be dangerous because if you are taking a lot of deductions then it looks like you are making very little money. This is why many people don't take deductions the year they are trying to buy a house.
3. Raise That Credit Score
Your credit score should be protected as much as possible. The credit score will be the single most important factor in determining how much interest you pay on your loan. This is why it is important that for the year and months leading up to the loan that you do everything that you can to raise those numbers. Using a credit card and then paying off the balance that month will help. Don't be late on any payments, not even your utilities, and don't open any new lines of credit. This will help to boost your score.
By doing these three things you can improve your chances of getting a home loan. For more information, talk with a loan or mortgage company, such as Premium Mortgage Corp.Share