Imagine this scenario: You’re in the beginning stages of your home search, casually checking listings to see what is on the market when you stumble across the dream home that checks all of your boxes. You tour the home, fall in love, and decide to make an offer. You talk to your agent, schedule an appointment with a loan officer, and start planning your move… only to be told that you do not qualify for your loan. Being denied a home loan can be heartbreaking, but it is not the end of your home buying dreams. In many ways, it can be a blessing in disguise. Now you have time to work on what you need to qualify for even better home loan terms. Here are three steps you can take to strengthen your home loan application.
Tune Up Your Credit!
There are many ways to improve your credit score if you are denied a home loan due to your credit score. According to credit reporting agency Experian, credit scores get updated by credit bureaus every 30-45 days. First, you need to address any delinquencies you have, as unpaid accounts can be the barrier between you and your home loan approval. Additionally, you’ll need to stay on top of your credit balance, as having a high revolving balance on your credit cards hurts your credit score. Try to keep your credit balance under 30% and ensure to make your credit card payments on time to improve your credit score. Set up auto-pay or create a calendar to help you manage your balances.
A Penny Saved is a Penny Earned
Now is the time to start saving for a down payment. A bigger down payment shows lenders that you are more invested in the process. Every dollar you save towards your down payment saves you money in the lifetime of your loan. A more significant down payment will earn you better home loan interest rates, in turn helping your Debt-to-Income Ratio (DTI). You can use a Debt-to-Income calculator to estimate your ratio as a FHA Loan will require a DTI of 36% or less and a conventional loan will require a DTI of 43% or less. Similarly, make a plan to pay off your current loans. You can drastically improve your home loan application by paying off your auto loans. Take an audit of your expenses and see where you can cut back on unnecessary spending.
Sometimes We All Need a Little Help
An experienced Home Loan Officer can guide you to the right resources. There are many public assistance programs out there for first-time home buyers. You may have to do a little online sleuthing, but the resources are out there! For example, Fresno County can connect first-time homebuyers with down payments grants of up to $27,500 that you do not need to pay back! These homebuyer assistance programs may be the little push you need to qualify for your home loan.
When You Are Ready to Reapply
Now that you have improved your credit score, saved for a higher down payment, and connected with the necessary resources, you will have a stronger home loan application. Granville Homes has over 40 years of making homeownership a reality. Granville Home Loan Officers have experience finding solutions to all your home loan questions. Contact one of our Loan Officers to continue your path to homeownership today!