How Chicago Homebuyers Can Increase Chances of Getting a Mortgage
Less than 10 years ago lenders were handing out mortgages like there was no tomorrow. This spring, it's a different story, say Chicago bankruptcy attorneys.
Just one-third of borrowers who apply for a mortgage in coming months will qualify, according to Wallet Pop. After being burned by a record number of defaults and with a glut of foreclosed homes on their hands, banks are not surprisingly older, wiser and a whole lot stricter. So what does a home buyer need to do to fall into that magic 33.3 percent?
Most of the time it comes down to one thing: poor credit. In fact, most people who apply for a home loan don't even know what their credit score is. If you don't know the status of your financial standing, how are you supposed to make improvements that can help get you into that house?
The ticket to home ownership is taking ownership of your credit. Your first priority is to stop any behaviors that could have a negative effect on your finances. That means no more big purchases or new credit cards. It's not like you'll never be able to buy another car or go wild at the mall (though keep in mind you'll need to save some money for those mortgage payments). But holding off while you apply for a mortgage will keep your credit from spiraling downward and make a better impression on lenders.
Now that you've stopped any financial bleeding, it's time to do some cleaning up. If you haven't already, request a free copy of your credit report at each of the three major credit bureaus - Equifax, Experian and TransUnion. Report any factual errors right away, as corrections can raise your score.
Most importantly, get your debt under control. From school loans to credit cards to cars, the less debt you have relative to your income, the higher your credit score will be. Lenders are once again getting serious about the old 30% limit - i.e. they prefer that your housing costs require less than 30 percent of your income. Paying down debt means less money going out to creditors. Less money going to creditors means more money for you to pay the mortgage.
It sounds simple on paper - lower debt, improve credit, get a house. But at DebtStoppers, we realize real life is always more complicated. If your struggles to lower debt don't seem to be getting you anywhere, bankruptcy may be able to help. To find out how filing for bankruptcy can improve your chances of increasing your credit score and qualifying for loans, try our free personal debt analysis. Our professional Chicago bankruptcy attorneys can help you identify the bankruptcy plan that's right for you - and your future house.