Before they approve you for a home mortgage, lenders want to be sure that you will be able to repay it.  They will take a detailed look at your financial situation to determine this.  We suggest several things you can do to improve your chances of getting approved for a home mortgage.  Not only will these actions help with your approval they will also prepare you for managing your payments once you obtain the home mortgage.

The first thing you should do is check your credit.  Make sure that there is no inaccurate information on your credit report.  This includes accounts that do not belong to you and accounts that are reported inaccurately.  Your credit report will come with instructions for disputing inaccurate information.

Once you have taken the steps to verify your credit report, you should next analyze your finances.  Take a good look at your income and spending each month.  Look for areas where you can decrease your spending.  This might be as simple as making a minor lifestyle change.  Prepare a budget for your household to add discipline to your spending habits.

Pay down your debts.  The lower your total debt load, the higher the amount of home mortgage you can afford.  Pay off minor debts like credit cards with low balances or collection accounts.  Not only will this improve your credit score, it will also make it easier for you to afford the home mortgage once you begin to make payments.  The lower debt load frees up additional funds in your budget allowing you a little extra room for furnishing your new home.

With the adjustments you’ve made to your household budget it should be easier to save for a down payment.  After paying off your credit card debt, you can put the money that would have been going toward your monthly credit card bills toward your down payment savings account.  A higher down payment allows you to borrow a higher home mortgage and afford a larger home.  You might have to make some sacrifices now to save for the down payment, but it will pay off when you are in a home that you love.

In the six months to one year before you apply for a home mortgage, you should not incur any new debt.  This includes using your credit cards and purchasing big-ticket items like vehicles or boats.  Making large financial purchases raises a red flag in the lender’s eyes.  Even if you can make the purchase and still afford a home mortgage, it is best to wait until after you have been approved for the home mortgage to make such a purchase.  You should not take any action that might cause the lender to deny your home mortgage application.

Preparing yourself financially is one of the best steps you can take in the months before you make a home purchase.  The financial readiness will payoff long after you’ve moved into your new home.