After a lot of searching and comparing, you have finally found your perfect dream home. Once you found the home of your dreams and have decided to move in you will need to take one more major step, getting your credit ready for mortgage approval. Your credit report plays a key role in not only getting a mortgage but getting one with a reasonable interest rate.
However, you cannot get your credit ready overnight; early preparation is a must. Here we will tell you 5 things you need to do to get your credit ready for a mortgage approval.
1. Review Your Credit Report
Ideally, once you have decided on a house, you should get and review your credit report several months in advance. If you generally pay your bills and debts on a regular basis then you can check your report two or three months in advance.
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2. Clear Any Errors
After you have obtained your credit report if you notice any errors or inaccuracies – like an item that is marked as unpaid but you have already paid for it – then you will need to dispute the error with the credit agency and get it corrected as soon as possible.
3. Know what Lenders Are Looking For
When you apply for a mortgage, one of the first things lenders do is look at your credit report to get a better idea of your credit score and your spending habits. When they do this, there are certain points that they look at closely. These are:
- Missed or late repayments
- The utilisation of credit limits
- Accounts under legal status or special attention accounts
- High Debt Servicing Ratio (DSR)
- Multiple credit applications or active loan
Pay special attention to these points when you are applying for a home loan as they may make or break your approval.
4. Avoid Making Any New Credit Lines
Once you about six to eight months away from applying for a mortgage you should avoid opening any new lines of credit as this may lower your credit score. Also, it is best if you avoid buying anything else using credit altogether. It may seem like a small purchase; however, these small purchases add up and may count against you when you apply for a home loan.
5. Apply For Mortgage Strategically
This last tip has to do with timing. When you apply for a mortgage, time it so that it doesn’t clash with any other loans you may be applying for. If for example, you plan on applying for a loan for a car, then you should either apply and settle the loan for the car first or apply for the mortgage first. Avoid applying for both loans at the same time or close to each other; keep a few months time apart between the loans.
Want to know more about mortgages and your credit? We want to hear from you, send us a message at email@example.com or call us at 012-299-6155 or 03-7450-6655.
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