When it’s time for you and your family to buy your first home or upgrade to a new home, you’ll be presented with getting a mortgage. And before you begin your house search it’s important that you know what kind of rates you qualify for and how much of a home loan you can comfortably carry.
There are certain circumstances that make it difficult to get a home loan, though.
Here are three factors that can limit your ability to take on a mortgage.
Bad Credit or No Credit
The better your credit, the lower the interest rate on your mortgage will be. That’s why it’s important to work on improving your credit score months before applying for a mortgage.
If you have no credit or bad credit you’ll likely be turned down for a mortgage.
Before applying for a mortgage try the following:
- Check your credit score (you can do so for free at a place like Credit Karma)
- Check your available credit to debt ratio
- If you have a lot of consumer debt work on paying it down
You should also work on saving up a sizeable down payment for your next home.
Self-Employment
Self-employed people can have a hard time getting mortgages – or any type of credit. Generally speaking you’ll need at least two years of self-employment taxes. You’ll also need to provide bank statements showing the income you’re bringing in.
Another choice you’ll have is to apply for a contractor mortgage. Some banks are now making mortgages easier to obtain for independent contractors and freelancers. If you’re in this situation ask your banker for advice for contractors.
You Have Too Much Debt
Having too much debt can not only limit the amount of money the bank will loan you but it can also prevent you from getting a mortgage altogether.
Before you decide it’s time to take on a home loan start working on paying down your existing debts. By doing this you’ll lower your financial burden, increase your credit score, and also increase the likelihood of you being given a home loan.
Conclusion
If it’s time for you and your family to purchase a new home take some time to make sure you’re financially prepared. Pay down your debt, research types of mortgages you may qualify for, and work on improving your credit score.
With hard work and preparation you’ll put your family in a better financial position and hopefully, a new house!
Have you run into any of these problems?
