Detroit, MI (PRWEB) November 08, 2013
Making a new home purchase can be an exciting and joyous occasion, and an even better investment. As such as it is also a costly expense, most people purchase a house with the help of a mortgage. However, if your credit score isn't stellar, you could struggle with getting approved for a home loan. The Federal Savings Bank informs its clients with how to bump up their credit score and choose the correct mortgage for a financially comfortable life.
In the post-recession era, lender requirements have tightened in order to adjust to the housing troubles that brought the market crashing down. While these new standards have made the economy more stable, those wishing to buy a home may be intimidated by tougher conditions in the qualifying process.
How to bump up your credit score
Perhaps one of the best ways to improve your chances of qualifying for a loan and end up with better terms for a low cost mortgage is to strengthen your credit score. Lenders look at this number as a way to predict if you will pay back your loan on time. A credit score is composed of your payment history, the amounts owed, types of credit, length of credit history and any new credit.
To improve your credit rating, the first action to take is to check the payment history for any mistakes. Late payments can negatively impact your score, so any errors should be refuted. If you have made late payments, proceed by paying all future bills before their due date. A lot of outstanding debt on credit cards can also lower a score, but can be fixed by paying off bills in full. Contrary to popular belief, canceling credit cards will not improve a credit score if there is still a remaining balance.
Other mortgage options
For those with less-than-perfect credit, it is important to note that a certain score doesn't guarantee you will get a loan. Taking a few steps to improve your credit score will help qualify you for a home loan, but there are still other options in the mortgage market if your score is lower. For a VA home loan - which does not require a down payment - a credit score is not the only qualification for getting a mortgage approval. While it is important to have a good credit rating in order to receive better loan terms, length and type of duty for veterans are major considerations during the qualifying process.
Income and employment history are also considered in a mortgage application, and can weigh just as heavily when it comes to getting approved. In the wake of the housing crisis, lenders are more understanding of homeowners who have missed payments, had their home foreclosed upon or fell into bankruptcy during the recession. New regulation shortened the waiting period for those who had gone through a foreclosure before applying for another loan.
When applying for a loan, a mortgage lender might approve your loan if you can prove your financial troubles were either caused by the factors related to the recession or are behind you. Other borrowers might be required to put down a larger down payment to reduce the risk of the loan. No matter what type of mortgage you apply for, having bad credit doesn't mean there are not loan options available.