Home japan financial crisis It was harder to get a mortgage in September, data shows

It was harder to get a mortgage in September, data shows


September was a good time to get a mortgage, at least from an interest rate perspective. The 30-year loan was on average less than 3% that month, giving borrowers the ability to freeze payments for affordable housing.

But despite these low rates, many home loan seekers have struggled to get a home loan. The reason? Lenders have imposed higher standards on borrowers.

The Mortgage Bankers Association’s mortgage credit availability index fell 1.9% to 118.6 last month, indicating that lenders have applied more stringent requirements to borrowers. Given that the US economy is still in a recession and unemployment has reached devastating levels since April, it makes sense that lenders would want to protect themselves. But that doesn’t make things easier for borrowers.

If you’ve struggled to get approved for a mortgage this year due to tighter borrowing terms, there are steps you can take to increase your chances of success. Start with these:

1. Improve your credit score

The higher your credit score, the more confidence mortgage lenders have in your ability to pay off your mortgage on time. Under normal circumstances, you need a minimum credit score of 620 to get a mortgage, but ultimately each lender sets their own standards, and today’s lenders may look for applicants with much higher ratings. If you can increase your credit score, you have a better chance of getting approved for a mortgage loan.

The best way to increase your credit score is to pay all of your bills on time. Eliminating credit card debt will also help, as will increasing your credit limit (this may seem counterintuitive, but the less revolving credit you have available at a time, the more your score will improve and increasing your credit limit will help). Plus, be sure to check your credit report for errors and correct any that could lower your score, such as overdue debt you’ve already paid. You are entitled to a free copy of your credit report every week during the pandemic, so getting this information is fairly easy.

2. Reduce your debt ratio

Your debt-to-income ratio measures your existing debt relative to your income, and the lower it is, the more attractive you will be a loan candidate. This is why it is a good idea to eliminate some of your debt before applying for a home loan. Prepaying a car loan, for example, could help you get approval to buy a home.

3. Increase your income

Mortgage lenders want to make sure that you are earning enough money to cover your loan payments, so the higher your salary, the more confidence they will have in them. Of course, you can’t just walk into your boss’ office and demand a raise right away, but you can consider finding a second job temporarily so that you can earn a higher income. To be clear, you can’t just do this job for a month and stop it. Your lender will want proof that the income you claim to earn is stable and constant. But if you’re willing to put in the effort, it might be easier for you not only to get a mortgage, but also to keep up with mortgage payments.

Today’s low mortgage rates make it a great time to get a home loan. If you’ve struggled to get approved, work on the above items to become a more viable mortgage candidate. It is possible that lenders will become even stricter in the coming months. Therefore, the more you do to improve your financial situation, the more likely you are to get the mortgage you are looking for.

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