
8 Steps To Sort Out Finances Before Mortgage

Buying a home is one of the biggest financial decisions you will make in your lifetime. Before shopping for a home, you must get your finances in order. This can help you get approved for a mortgage and secure the best possible interest rates. Before applying for a mortgage, here are some steps to get your finances in order.
Reduce your debt
Mortgage lenders prefer borrowers with low debt-to-income ratios, meaning your debt should be a small percentage of your income. To improve your chances of getting approved for a mortgage, reducing your debt as much as possible is essential. Start by paying off any outstanding balances on credit cards and loans. Consider consolidating high-interest debts into a low-interest loan or balance transfer credit card to save money on interest payments.

Gabrielle Monaghan/ Getty Images | Find a mortgage that makes sense for your financial situation
Build your emergency fund.
Before applying for a mortgage, ensure you have enough savings in emergencies. Having three to six months’ worth of living expenses saved up in an emergency fund is recommended. This can help you cover unexpected expenses, such as medical bills or car repairs, without relying on credit cards or other loans. A robust emergency fund also shows lenders that you’re financially responsible and capable of handling unexpected expenses.
Increase your income
If you are struggling to save for a down payment or pay off debt, consider finding ways to increase your income. This could mean getting a part-time job, freelancing, or starting a side business. Increasing your income will help you save more money and improve your debt-to-income ratio, which is an important factor in the mortgage approval process.
Keep your credit accounts open.
While it’s important to pay off high-interest debt, it’s also important to keep your credit accounts open. Closing credit accounts can lower your credit score and make it harder to qualify for a mortgage. Instead, focus on paying down the balances and keeping the accounts open.

OSCAR WONG/ GETTY IMAGES | Becoming a desirable home loan candidate involves improving your credit
Review your credit report.
Your credit score plays a significant role in the mortgage approval process. A high credit score shows lenders that you’re a low-risk borrower, while a low credit score may indicate you’re a high-risk borrower. Before applying for a mortgage, you must review your credit report and dispute any errors or inaccuracies. You can get a free credit report from each of the three major credit bureaus once a year at AnnualCreditReport.com.
Seek advice from a financial advisor.
If you are unsure how to get your finances in order before applying for a mortgage, consider seeking advice from a financial advisor. They can help you create a budget, pay off debt, and improve your credit score.
Reduce your debts
Paying off your debts can significantly improve your credit score, one of the key factors lenders consider when assessing your mortgage application. Aim to pay off as much of your credit card balances and other loans as possible before applying for a mortgage.

iStock/ Pixabay | Stop being chained down by bad credit
Save for a larger down payment.
A larger down payment can help you get approved for a mortgage and lower your monthly payments and interest rates. Experts recommend having at least 20% of the home’s value as a down payment.
More in Pocket Change
-
`
What to Consider When Buying Commercial Real Estate?
Buying commercial real estate can be an intimidating prospect – but it does not have to be this way. With some...
May 11, 2023 -
`
Applying for Student Loans – Begin with Government Loans
If you are considering sending out an application for a student loan, you should always begin with government loans which are...
May 4, 2023 -
`
Pro Tip: Pay Your Mortgage & Double up Your Wealth Through House Payoff Funds
Paying off mortgages is one of the financial stresses that most Americans struggle with. Fairly so; it takes forever to clear...
May 4, 2023 -
`
Business Formation Tips: How to Start a Business?
It is widely known that the entrepreneurial vibe is extremely intense. With all the established, progressive, and innovative start-up businesses that...
April 27, 2023 -
`
A Look at the History of Celebrity Crypto Endorsement
Cryptocurrency has been a popular trend for the past few years, and many celebrities have hopped on board, endorsing different crypto...
April 19, 2023 -
`
6 Easy Steps To Get Out Of Debt
Getting out of debt can be a daunting task – but it is not necessarily impossible. With the right tools and strategies,...
April 15, 2023 -
`
Understanding “Buy Now Pay Later”
Buy Now Pay Later (BNPL) is a payment method that has become increasingly popular recently. It allows consumers to purchase items...
April 8, 2023 -
`
Experience A Taste Of The Luxurious Life Of Lady Gaga, Now Available For Rent!
Lady Gaga is a singer, songwriter, and actress who has taken the world by storm with her message of self-confidence and...
April 1, 2023 -
`
Can Monopoly Really Cause Market Failure?
A monopoly exists when a business has exclusive control of a product or service in a particular market, meaning they are...
March 25, 2023
You must be logged in to post a comment Login