Getting rejected for a mortgage isn’t the end of the world. You still have a chance to nab that dream home, you just need to refocus, do some work and give it another go. Interest rates are expected to remain low for the next couple of years. Here are the steps to take before you apply again for a mortgage.
Improve your score
Your credit score needs to be as good as possible before re-applying. Lenders look at your score as a way to gauge your ability to pay back the loan. You’re going to need a credit score of at least 620 to qualify for a mortgage (some lenders will want it even higher). The best way to increase your score is to pay your bills on time, every time. It’s not a fast process, but over time, your stellar payment history will be reflected in a boosted credit score. You should also check your credit report for inaccuracies that could be negatively impacting your score.
Pay down debt
As USA Today notes, another warning sign from lenders is your debt level. If you’re deep in the red, lenders worry you won’t be able to handle the additional debt from a mortgage. Make a plan to pay down your debt — pay down the highest interest debt first — before re-applying for a mortgage.
The more financial cushioning you have, the better. That goes for life in general, but it is especially helpful when it comes to getting a mortgage. Take some time to review your budget and add as much as you can to your weekly/monthly savings deposits. The more savings you have, the more lenders will consider you a safe option for a mortgage.