Getting a mortgage is not as easy as it used to be, banks, and lenders make it much harder after the subprime crisis.
What this means to new borrowers is that you need to be well qualified for a mortgage before you apply.
But this doesn’t mean new and young borrowers are out of luck. You can still get approved for a mortgage with some basics in place.
So what it does it take for mortgage lenders to approve you for a home loan today?
If you’re on the market or thinking of purchasing a home in the near future, here are few things you should know.
So without any further ado, here’s what you need to learn and do before applying for a mortgage.
1. Your Credit Score Should Be 700+
The importance of having and maintaining a good credit profile can’t be overemphasized. A mortgage is a huge responsibility. The mortgage lenders risk a lot of money extending mortgages. And rightfully so, they’ve become more cautious since 2008’s subprime mortgage crisis.
Back then, you could qualify for a loan with no money down without good credit. Borrowers with a credit score below 669 were called subprime borrowers. And the mortgage lent to them was considered a subprime loan. It meant high risk for lenders, but it was still fairly easy to get mortgage loans without good credit.
Many of those home buyers could not afford and ended up defaulting on their loan. Since then, subprime mortgage vanished with new regulation and lenders are more cautious.
Today, you are expected to have “good credit” to qualify for a loan, and the higher your score, the better rate you can get.
According to Carrington Mortgage Holdings, a score in the mid-700s is their current average.
In the credit score range of 300 to 850, a score above 720 is generally considered a “good credit”. A score below 600 is considered very high risk and met with extreme caution by lenders.
To qualify for a mortgage, good credit is essential. To get a favorable mortgage rate, excellent credit is a must.