How to improve your mortgage approval odds
Applying for a mortgage in the next year or two?
There are a number of steps you can start taking now to improve your financial position for when the time comes to apply. Proving to your bank or lender that you have a good financial track record could help to speed things up when you’re ready to make that big purchase.
1. Understand your credit rating
It’s a good idea to be aware of your credit rating; a numerical score that demonstrates your reliability and trustworthiness as a borrower. Your score considers a number of aspects such as how much credit you have borrowed, if you have any unpaid or overdue loans, how many credit applications or enquiries you’ve made, and more. The higher your credit rating is, the more willing a lender will be to work with you. You can check your credit score here.
2. Pay off any debt
Consider how much you currently owe on your credit card and whether you have any other loans. Is it possible to pay them off sooner? You should also take some time to evaluate what you’re putting on your credit card and keep credit card spends to a minimum or better yet, see if you can get by without a credit card. Minimising debt is a good way to improve your credit score.
3. Create a household budget
You may be surprised at how quickly those small, everyday purchases add up. Create a budget for your household and give yourself a small allowance each week to stick to. If you buy anything outside of your budget, make sure you keep track of it. This should free up some money for debt repayment.
4. Save a portion of your paycheck
Once you’ve evaluated your finances and have a good idea of how much is leftover, try setting aside a portion from each pay. By putting this amount in a high-interest savings account, you’ll also accumulate interest while it’s sitting there. This will allow you to build some savings which can be used to pay down debt or even towards your deposit, but it will also demonstrate your consistency.
Did you know that your bank will look at the last three months’ worth of financial history when you apply for a mortgage? They want to see a history of on-time and consistent payments, a low debt-to-income ratio, and any missed payments. Spending some time to create good financial habits before you apply for a mortgage should help the approval process along.
Please note, this article is intended as a guide only. These tips in no way guarantee approval for a mortgage, nor does Achieve Homes make any promises for your approval odds when following these tips.