It’s genuinely no secret that buying a home is far more affordable than renting; mortgage loan repayments are substantially lower than rental prices. But unfortunately, for most renters out there, securing a mortgage loan is where the trouble comes in.
Even though one would assume that being able to afford the rental payments on a property is surety enough that you can afford mortgage loan repayments that are lower, there are a few illusive hoops you’ll need to jump through to prove affordability otherwise.
Lenders will look at things like your credit score, current debt obligations, employment status, income stability, and other seemingly minor details.
So, if you’re thinking of purchasing Texas real estate, we’ve listed some valuable tips to improve your chances of securing pre-approval from a lender.
Eliminate Debts
The less debt you have behind your name, the higher your affordability rating will be when applying for a loan of any kind.
Eliminate debts using the snowball or avalanche method. With the snowball method, it’s essential to pay debts with a strategy that focuses on smaller loans first, while the avalanche method works in reverse; both are effective.
Use Some Credit
Even though the debt is bad, you still need a record that proves you know how to use credit with care. Instead of eliminating all debts, it’s wise to hold onto a clothing account or other store credit or even hold a phone contract to ensure your financial stability is being recorded.
Boost Your Credit Score
If you don’t have a suitable credit score, lenders will reject applications regardless of your current financial situation.
The best way to boost your credit score is to use some credit carefully, pay bills on time, and write off debts where possible.
Prepare A Downpayment
A downpayment also secures your chances of pre-approval. If you have a great credit score, a stable income, little debt, and use credit wisely, you might still receive a rejection simply because you don’t have a downpayment.
It’s essential to save up at least ten percent of the mortgage loan’s total value. However, it’s even better to save twenty percent for the downpayment to increase your chances further even more. Moreover, with a larger downpayment, your mortgage repayments will also be significantly lower.
Budget For A Home You Can Afford
Lastly, it’s also critical to ensure you are applying for a mortgage loan that you really can afford. With this, it’s essential to look beyond the monthly repayment because there are a few more costs associated with owning a home.
Consider the costs of homeowners insurance, utility bills, property taxes, and transfer fees. Additionally, it’s also crucial to determine the ongoing costs of property maintenance.
Now that you know the costs, you can make a better budget for a home you can genuinely afford. When lenders determine your affordability, you’ll have a higher chance of approval if you can comfortably afford the repayments with consideration of all the extra costs of owning a home.
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