The Mortgage Bankers Association (MBA) reports that affordability for homebuyers improved in July as applicants’ mortgage payments fell 1.3% to $2,140. The MBA expects slower home price growth, coupled with lower interest rates, to further ease affordability constraints and lead to a rebound in housing market activity.
However, despite the improved conditions, many potential homeowners have not been able to gain access to a mortgage. There can be many reasons for this. But even if you do not meet the income requirements, there are still ways to make your dream of owning your own home come true.
Jennifer Beeston, branch manager and senior vice president of mortgage lending at Rate, recommends the simplest thing to do is to look for a less expensive home that fits your income. Changing the type of property you’re looking for can significantly increase your chances of a successful purchase.
Bill Lyons, CEO of Griffin Funding, suggests reducing your debt. The debt-to-income ratio, which compares the amount of debt you owe each month to your income, plays a crucial role in lending. Reducing high-interest debt can increase the amount available for mortgage payments and thus improve your chances of approval.
Sacha Ferrandi of Source Capital successfully used an alternative income verification strategy. He helped a freelance artist with irregular income by proving consistent income through contracts, bank statements and client testimonials. This detailed presentation helped the lender recognize the artist’s financial potential.
Another option is to add a co-signer or guarantor. Eric Croak of Croak Capital recommends this strategy to meet income requirements. A guarantor can step in if you default, increasing your chances of mortgage approval.
For people with special tax needs, certain mortgages, such as VA loans, can be helpful. They take into account not only the debt-to-income ratio but also “residual income,” a more generous method of calculating income.
Ultimately, patience is key. Improving your credit score or employment history can strengthen your application and increase your chances of getting a mortgage.