When it comes to buying the home of your dreams, one of the biggest obstacles for so many buyers is the health of their credit. Your credit report can be the one massive roadblock that prevents you from living your own American dream in the home you’ve always wanted.Contact Us
Getting a home mortgage in Denver is easy when you’ve gone through the process of rebuilding your credit score and put together all the qualifying documents and information. But many people who are looking to buy a home now are not in any place to get approved by any lender.
Many times when you are applying for a home loan, the reason you are denied is that you haven’t checked your credit report, or even in some cases, are in the midst of the time-consuming process of credit repair by yourself. Today, we want to share with you a little more of what goes into how to rebuild credit score and a little about the mortgage process and why hiring a credit counseling company to help you rebuild your credit report to a level that gets you approved is essential.
You may want to try to repair your credit score yourself, which is possible to do. It can take longer than using a company that specializes in credit counseling. But we’ll dive into that in a moment…
If you’re looking to tackle credit score repair on your own, there are some things to keep in mind that will ensure your success.
This is one of the biggest reasons, so many people who apply for mortgages get denied. They’re overspending. If you cannot afford to buy something with the money in your bank account, then putting it on a credit card is the last thing you want to do. It doesn’t matter what it is, from a new stove, new kitchen remodel, to those shoes or new laptop you must have right now—if the money isn’t in your account to buy it, then forget it!
Piling up more debt on your credit cards will only lower your score and put you further and further away from actually being able to buy the home you’ve always wanted.
You may not realize how much paying your bills on time actually accounts into your credit score and credit report. But timely payments on your bills actually accounts for 35% of your credit score, which means that it actually has the most weight on your score. The more on-time payments, the more your score improves. Work to pay the entire amount due on the credit statement every month before it is due, or if you can’t, then be sure to make the minimum payment every time. Paying on time is the key to a better credit score.
One of the easiest ways to start improving your score is to ask your credit card company about getting a higher credit limit. Especially if you’ve been paying your card on time for 6-12 months, you’ll have a higher chance of getting approved for a credit limit increase. Having a higher credit limit helps with the factoring of your credit utilization. This is the percentage of available credit you use each month which factors toward 30% of your credit score. But beware! Getting approved for a higher credit limit isn’t an excuse to go out and spend more on your credit card every month.
Any lender you will talk to about getting a home mortgage in Denver will do a deep dive into your credit report and history. So it’s vital that you do it first. Review everything on your credit report and dispute anything erroneous. One in five credit reports has errors on them due to the volume of reports the reporting agencies are dealing with daily. Errors on your credit report can range from fraudulent charges to incorrect report status and even to identity theft. Some errors can cost you as many as 100 points on your credit, so be sure to take the time to do the deep dive into your report before the mortgage company does, and you get denied.
When you’re applying for a home loan, any mortgage company in Denver is going to look at many different factors to decide if they’re going to approve you or not. They have a comprehensive checklist that they’ll use as they’re reviewing your file, so the more items you have checked off, the better your chances of getting approved are.
The most significant factor in their approval process is your debt to income ratio. The more debt you have each month means, the less you’re able to afford. This can include things like child support, credit card debt, car loans or leases, personal loans, and more. They factor that against your income every month, and if it doesn’t check out that you can afford a mortgage, then they’re going to kindly say no thanks.
They will examine two types of debt to income ratios when they’re looking through your report. The first is called the housing ratio, which is the percentage of your income that goes to your house expenses. And the second is your back-end ratio, the overall debt to income ratio that looks at your entire debt to establish your ability to repay your mortgage every month.
Having the right credit counseling company in your corner can help you ensure you get approved for your home mortgage in Denver. At Peak Financial, we are a home mortgage refinancing Denver and credit counseling company that enables you to get your credit report repaired and ready to be approved through our home mortgage programs. Call us today to find out how we can help you get approved for the home of your dreams!