Are you in the market for a new home? Whether it’s your first home, an investment property, or  you’re a home buying veteran, navigating your way through the mortgage process can be… a lot. Especially if you may not fit the standard criteria—that brings in a whole other level of nerves.

Now, just because you may not qualify for a typical mortgage through a standard bank, doesn’t mean your chances are null and void. There are active steps you can take starting today to improve your mortgage chances, as well as other mortgage options than through your bank. Let’s discuss!

Improving Your Credit Score

In order to secure a loan for anything, you typically need to show the lender that you are a trustworthy borrower—they don’t want to lose their money, right? So it makes sense. But how does a lender know that you’ll make payments consistently and on a timely fashion?

That’s where your credit score comes in. A credit score is a number that represents a person’s “creditworthiness”. Basically, on a scale from roughly 300-900, how likely are you to pay back the money you borrowed?

If your current credit score is… lacking, don’t fret. There are things you can do right now to improve that number.

Review Your Credit Report

You need to know what your starting point is before you can make any sort of improvement. Start with getting copies of your credit report from the major credit bureaus: Equifax, Experian, and TransUnion.

Once you have that in front of your eyes, look for any errors that are dragging down your score. These could be incorrect account details or fraudulent activities. 

• Quick Tip: Dispute any inaccuracies you find with the relevant credit bureau.

Pay Down Debts

The next step is to start reducing any outstanding debts. This is a pretty surefire way to give your credit score a serious leg up. If you have a lot of debts and are feeling overwhelmed, take a deep breath. Start with focusing on high-interest debt first. If you do that, you’ll end up paying less money (through interest) in the long run. That can save you a hefty amount! 

• Credit Utilisation: Aim to keep your credit utilisation below 30%. Not sure what that means? Picture a jar of cookies. Your jar can hold 100 cookies—that’s the max amount you’re allowed. If you have 30 cookies in the jar, you’re using 30%. Your cookie jar is like a credit card limit, and the cookies are the amount of money you’ve spent. So, don’t max out your cards. Keep them at a max of 30%

Avoid New Credit Inquiries

The worst thing you can do while trying to raise your credit score is to apply for new lines of credits (credit cards, loans, etc.). Each application dings your credit score, shaving off a few points—and that can add up.

• New Accounts: Opening several accounts in a short time frame can be perceived as risky behaviour by lenders.

Keep these strategies in mind, and with time, your credit score should reflect your efforts.

Strengthening Your Financial Profile

Our second tip focuses on strengthening your financial profile. If you want the likelihood of your mortgage application to increase, it’s crucial to present a solid financial stance. 

Increase Your Down Payment

One of the best ways you can appeal to a mortgage lender is by offering to put down a decent sum of money towards the loan from the get go. Why? Well, this shows them how serious you are. It also shows them that you know how to handle money—you were obviously able to save  up for that down payment, right? That’s huge!

• Less than 20% down: You may need Private Mortgage Insurance (PMI). This is a level of protection for the mortgage agency.

• 20% or more: Avoid PMI and possibly negotiate better terms. The win-win!

Manage Your Debt-to-Income Ratio

Another way you can stand out during your application process is to have a low debt-to-income ratio (DTI). If you’re borrowing a lot less than you’re bringing in, lenders will see that you manage your debts very responsibly. You become a lower risk borrower.

Here's what to aim for: 

• Front-end DTI: Keep housing costs below 28% of your monthly income.

• Back-end DTI: Keep total debt obligations under 36% of your monthly income.

Taking Advantage of Professional Guidance

Navigating the mortgage maze can feel like a wild roller coaster ride. But guess what? You don’t have to ride it alone! Seeking professional guidance can turn that scary ride into a thrilling adventure with a happy ending.

Getting help from a mortgage professional can be a game-changer. They can offer insights and strategies that you might not know about, giving you an edge in the loan approval process. They understand the ins and outs of the mortgage world and can help you find the best deals, often saving you money and time.

Websites like https://www.whenthebanksaysno.co.uk/ can guide you step-by-step through the mortgage process.

Onward to Homeownership!

Feeling a little more confident? Good! Glad we could help. If you take these proactive steps towards boosting your mortgage chances, they’re sure to pay off. Next thing you know, you’ll be living large in your very own home. Pretty sweet!