It’s fair to say 2021 has been a difficult year to buy a home. Though mortgage rates have been nice and low, limited inventory has made finding homes a challenge. Plus, sky-high prices have priced out buyers who are on tight budgets.
Things could improve in 2022, though. We could see an uptick in home listings as more sellers move past their economic fears and gear up to make changes to their living situations. Once more real estate inventory arrives, home prices could start to come down. It’s not a bad idea to think about buying a home next year if you’ve been unsuccessful this year.
But if you’re going to buy a home in 2022, you’ll probably need a mortgage to finance it. And so it pays to make these moves to increase your chances of not only getting approved, but snagging a great interest rate in the process.
1. Check your credit report and score
Your credit report will give you a snapshot of your various loans and credit card accounts, as well as your payment history and utilization of your existing credit. Ironically, it won’t give you access to your credit score. To find out your credit score, you’ll need to either pay for it or see if it’s available through your bank or credit card company.
Either way, it’s important to review both of those items carefully. It takes a minimum credit score of 620 to qualify for a conventional mortgage, but you’ll need a much higher score than that to snag a great rate on a home loan. If you check your score and see it needs work, you’ll know to take steps to boost it.
Similarly, it’s important to make sure your credit report is accurate and free of errors that could cause a mortgage lender to deny you a loan. If you’re listed as having outstanding delinquent debts that were never yours to begin with, that’s the sort of thing you’ll want to address before you’re ready to fill out a mortgage application.
2. Pay off existing debt
Mortgage lenders rely heavily on credit scores to see who qualifies for a home loan. In addition, lenders will look at your debt-to-income ratio. That ratio measures the amount of debt you have relative to your income. The lower it is, the easier it becomes to get approved.
If you’re hoping to get a mortgage next year, now’s a great time to work on ditching some of your debt. If you have credit …….