5 Solutions to Help You Qualify For a Mortgage

Are you ready to apply for a mortgage but feel uncertain about your prospects? If a low credit score, high debt-to-income ratio, or inability to make a down payment have you sidelining your homeownership dreams, take a closer look at what really goes into qualifying you for that home loan. These tips can help boost your chances of being a solid mortgage loan candidate.

1) Improve your credit score

Your credit score will impact your ability to qualify for a mortgage, but minimum credit score requirements are not set in stone and often fluctuate based on market and economic conditions as well as loan program types. Generally, a conventional mortgage will require a minimum score of 620. If a low or poor credit score is preventing you from qualifying for a mortgage, work on improving it:

• Pay down your revolving debt. If you have high balances on one or more credit cards, work to pay down those balances. The more available credit you have, the higher your credit score will be.

• Use that old credit card. Did you pay off a credit card years ago and haven’t used it since? If it’s still open, make a small charge on it to show it as an active credit account with a high available balance.

• Request a credit increase. You can also make that available balance higher on your credit card by calling the card issuer and asking for a balance increase. If you’ve been a good customer who pays your bills on time, this simple ask could change your credit score easily and quickly.

2) Choose a different loan program

Different loan programs have different requirements, so if you don’t meet muster for a conventional loan, work with your OVM Financial loan officer to investigate other loan program options:

• Government-sponsored FHA loans require smaller down payments, only 3.5% if your credit score is at least 580.
• VA loans are available if you’re active-duty military, an honorably discharged veteran, or the spouse of a veteran who died in the line of duty. OVM Financial will work with you even if you have a poor credit score, and VA loans do not require down payments.
• USDA loans are an option for many Americans, and you don’t have to be a farmer to qualify. Even better, they have no minimum credit score requirements.

3) Include all sources of income

The main thing your loan officer will consider when you apply for a mortgage is your debt-to-income ratio (DTI). That ratio is your monthly debt payments divided by your monthly income. Most conventional loans require a DTI of under 36%, but some loan programs may go as high as 55%. Before you despair that your DTI is too high, make sure you’re includingall your income on your mortgage application, not just the salary from your full-time job, for example.

Overlooked sources of income you might have include:

• Alimony or child support payments
• Rental income from real estate you own or manage
• Social Security income
• Reserve or National Guard pay

4) Limit your tax deductions

If you’re self-employed and ready to apply for a mortgage, consider limiting those tax deductions on your Schedule C. That will increase your adjusted gross income and your DTI.

5) Use a co-borrower

If you can’t improve your credit score sufficiently to qualify for mortgage financing options at OVM Financial, it might be time to consider a co-borrower. A spouse, relative, friend, or significant other with a strong credit history can apply for a mortgage with you to help your qualification issues disappear. However, it’s important to understand that a co-borrower is on the hook for your mortgage, too, so if you can’t make payments, you could negatively impact both your credit scores for the future.

Need more expert advice on qualifying for a mortgage? Our team of expert loan officers is here to help. Give us a call, or start your application online.