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Lenders may be getting stricter, but all is not lost.

Key points

  • Most home buyers need a mortgage to purchase a home.
  • If you’re worried about qualifying for one, here are some steps to take.
  • If you can improve your credit, reduce your debt, and increase your income, you’ll have an easier time getting approved for a mortgage.

When the US housing market crashed in 2008, one of the main reasons was that many homeowners got in over their heads, taking out mortgages they couldn’t afford. Since then, mortgage lenders have gotten tougher on approving borrowers, and that’s a very good thing.

But sometimes more stringent borrowing requirements can be a challenge for applicants. You may be financially ready to buy a home, but your mortgage has been rejected anyway.

In August, the Mortgage Bankers Association’s Mortgage Availability Index fell from the previous month. This means it was harder to qualify for a mortgage in August than in July.

If you’re looking to buy a home and don’t have a lot of money to cover the purchase, there’s no doubt – you’ll need a mortgage. Here are some steps you can take to increase your chances of being approved even as lenders tighten their standards.

1. Boost your credit score

Your credit score is a measure of your reliability as a borrower. The higher this number, the less risk a mortgage lender will think of lending you money to buy a house. And so, if your credit score could use some work, raising it could be your ticket to mortgage approval.

Now you should know that you need a minimum credit score of 620 to qualify for a conventional mortgage. Some mortgage programs, like FHA loans, work specifically with borrowers whose credit isn’t so strong.

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But a credit score of 620 isn’t guaranteed to get you a mortgage, and you can’t end up with such a high mortgage rate with that score. So if you really want a shot at getting an affordable mortgage, aim for your credit score to be in the 700s – ideally, in the mid-700s or higher.

2. Repay a debt

Your debt-to-equity ratio is another metric that mortgage lenders use to assess loan applicants, and it measures how much debt you have relative to your income. The lower this ratio, the more likely a lender will be comfortable with a mortgage, so work to pay down some of the existing debt to lower this ratio.

If you’re going to pay off debt, focus on credit card debt. Not only is it probably your most expensive, but having too much could lower your credit score.

3. Increase your income

Before your lender gives you a mortgage, they want to make sure you’ve made enough money to cover the payments that come with it. Increasing your income could make it easier to qualify for the mortgage you want.

Right now the job market is strong, so it’s a good time to negotiate a raise. You can also increase your income by lining up a second job.

Although the availability of mortgage credit decreased in August, that does not mean that you are likely to have trouble getting your mortgage application approved. But if you’re worried, follow these steps to increase your chances of success.

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