Getting a mortgage can be a tricky thing to do even when you’re applying jointly with another candidate. But when you’re applying solo, it can be even more challenging, because instead of relying on two incomes to get the loan amount you’re after, you’ll be using a single income.
Still, that alone doesn’t have to be a deterrent. If you play your cards right, you can score a mortgage on your own — and perhaps a terrific interest rate on that home loan to boot. Here’s how to pull that off.
1. Make sure your credit score is in good shape
When you apply for a mortgage solo, having good credit becomes all the more important. You’ll generally need a minimum credit score of 620 to qualify for a conventional home loan, but many lenders will want to see a higher number. And if you want to snag a low interest rate on your mortgage — which will help make your monthly payments more affordable — you’ll generally need a credit score in the 700s or higher.
In fact, if you get your score into the mid-700s or better, you might qualify for the best rates out there, so take the time to boost your score if it needs some work. You can raise your credit score by correcting errors on your credit reports, paying all bills on time, and eliminating some credit card debt.
2. Pay off some existing debt
One important factor mortgage lenders look at is your debt-to-income ratio, which measures your existing debt relative to your income. You’ll want to keep that ratio as low as possible to give lenders confidence that you can swing your mortgage payments on your income. So paying off an existing loan or credit card balance before applying for a mortgage could really increase your chances of success.
If you can only pay off one type of debt in the near term, focus on a credit card balance. Chances are, you’re paying a higher interest rate on that debt than another type. Not only that, but having less credit card debt could help your credit score improve.
Only revolving credit counts toward your credit utilization ratio, which makes up a big part of your credit score. This is the ratio between how much revolving credit — that’s your accounts with balances that vary from month to month, like credit cards — you’re currently using and how much is available to you.
On the flip side, if you pay off a personal loan (which has a set number of payments before the debt is paid in full), it’ll help your debt-to-income ratio, but it may not have the same positive impact on your credit score as paying off a credit card.
3. Figure out how much house you can afford
Paying a mortgage (not to mention the other expenses of homeownership, like property taxes and maintenance) can be tricky on one salary, so before you apply for a home loan, you’ll need to run some numbers with a mortgage calculator to see how much house you can truly afford. As a general rule, it’s a good idea to keep your monthly mortgage payment, property taxes, and homeowners insurance costs to 30% or less of your take-home income. There’s a bit of wiggle room with this formula — such as if your other living expenses are exceptionally low — but for the most part, that’s a good threshold to stick to.
Your income will also be a factor in a lender’s decision to grant you a home loan or not. Figuring out how much you can afford to borrow will help you avoid a scenario where you request too high a mortgage and get rejected.
To some degree, people who apply for a mortgage jointly have an advantage — namely, two incomes for a lender to consider instead of one. But it’s totally possible to get a mortgage on your own — especially if you follow these tips to increase your likelihood of approval.
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