Buying a house is an exciting and major milestone. However, if you are like many people, you have debt — which may be preventing you from buying a home of your own. In fact, the average amount of debt carried by adults in India is ₹59,748. As much as it may feel like a limiting factor, there are effective strategies you can use to get approved for a mortgage, receive an incredible interest rate, and free up cash for a down payment. If you are planning to purchase a home in the next six to 12 months, use these expert strategies presented by TechBizFin.
Know your credit score
When was the last time you checked your credit score? Knowing your credit score (CIBIL score) is one of the most important things you can do before buying a home. Even if it’s only been a month or two since your last check, start reviewing your score on a regular basis. One late payment — or one account brought back on track — can change your score 50+ points within a matter of weeks. When you know what kind of score you are working with, you can accurately estimate what interest rate you’re eligible for. You can also see if there are errors that need correcting when you pull your full credit report. Knowledge truly is power when it comes to having an accurate grasp on your credit score.
Use trustworthy credit repair services
If you find that your credit score needs some work, not to fear. Prior to applying for a mortgage, enlist the help of trustworthy credit repair services. These types of services can boost your credit score by reviewing your full report and verifying the accuracy of everything listed. Quality credit repair services also check for signs of identity theft. All inaccuracies are challenged, and when possible, removed. You’ll also be able to create a plan to fix any problematic items that could not be removed.
Start saving up for your down payment
In addition to knowing your credit score, and removing inaccuracies and damaging items, you’ll need to work on saving up for your down payment. For decades, experts have recommended saving 20% of the value of the home for a down payment. Putting down 20% can help secure lender approval, as well as some of the best mortgage rates. However, when you have large monthly credit card, student loan, and car payments, however, this can be next to impossible.
When money is tight, many people opt to purchase an “as-is” home since these properties tend to cost less. However, it’s important to understand that while it may not cost as much up front, you may discover you’re stuck with expensive bills to correct all the problems. Before heading down this path, ensure it’s right for you.
Lower your debt-to-credit ratio
If you are looking to raise your credit score even further, get strategic about what debts you pay down first. When you are only 6-12 months away from buying a home, you’ll want to use strategies that will boost your score as quickly as possible. Since your debt-to-credit ratio is a massive factor in calculating your score, aim to pay down cards that are maxed out or that have a high balance. Experts recommend keeping your credit utilization under 30% to avoid damage to your credit score.
Debt can be an obstacle in the home buying process. However, when you empower yourself with knowledge and take smart action, you can get approved for a mortgage rate at the best possible interest rate.