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Despite housing prices being at similar levels as in 2002, on the average, it is still difficult for many to secure a mortgage in today’s tightened credit market.  There are actions that a potential borrower can do that will assist them in securing a mortgage with more favorable terms:

1.         Credit Score.  The largest factor in determining whether one qualifies for a mortgage is their credit score.  Credit scores are determined in large part based on the borrower’s debt to income ratio.  Credit scores generally need to be 680 or higher to qualify for a lower mortgage interest rate.

2.         Reduce your debt.  To qualify for a lower interest rate, reducing debt is a priority.  Debt can be reduced through lump-sum payments or if that is unaffordable, bankruptcy is usually a viable option to relieve on of their debts and obtaining an improvement in debt to income ratio.

3.         Don’t make any large purchases.  Whether on credit or otherwise, large purchases diminish the amount available for a down payment or increase the amount of outstanding credit, in either event, a large purchase will hinder one’s ability to get a low interest rate.

4.         Larger Down payment.  A larger down payment will increase your ability to qualify for a mortgage and achieve a lower interest rate.  Further, the reduction in the loan to value ration assists in a lower rate as well.  Savings by avoiding or discharging debt through bankruptcy or cutting down on spending will enable one to have a larger down payment on their mortgage.

If there are any general questions or topics you would like to read about relating to bankruptcy law in the Eastern Pennsylvania region, you may contact the Bankruptcy Lawyers at Sadek Law Offices, LLC at 215-545-0008 or 610-432-3111 or email brad@sadek-cooper-site. Thank you.