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What to do before re-applying for a home mortgage

Getting rejected for a home loan doesn’t mean you can’t reapply and get approved later. But before filling out another mortgage application, here are some things you may want to consider doing first.

Clean up your credit

Mortgage lenders have money to lend if you are viewed as a good credit risk. A credit score of 720 or higher will be viewed positively if you apply for a home mortgage. However, even a good credit score won’t save your application if you are underwater your current home loan or have too much debt.

Getting rid of as much debt as possible can help your loan application. That doesn’t mean shifting debt around from one credit card to another or transferring all of it to a debt consolidation loan. You need to actually decrease the outstanding balance owed to creditors for it to really impact your credit score. If you need help putting together a debt reduction plan, look for a reputable credit counselor that can help.

Save more money

Whether you are look to refinance a home loan or get a new mortgage to buy a place, the more cash you have at closing the better. Having a large down payment when purchasing can help you avoid mortgage insurance payments if your equity is going to be 20 percent or higher. If you don’t have enough equity to refinance to take advantage of today’s low interest rates, you may be able to get approved for a loan by bringing cash to the closing.

Get help with a home loan

If all else fails with trying to get a loan on your own, consider asking a parent or other relative for help. You may have a better chance of getting approved for a mortgage if you have a co-signer with a strong credit history. A co-signer is someone who agrees to be responsible for the mortgage loan if you aren’t able to pay it back. Even if your relative isn’t willing to co-sign, he or she may be willing to contribute money toward the down payment.

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