Qualifying for a Mortgage in a Tough Economy

February 8, 2009

Getting a mortgage has become increasingly challenging during recent months. One recent survey showed that 67 percent of those who applied for a mortgage found it more difficult. Although banks may have stricter lending rules now, it is still possible to qualify for a mortgage, according to the Virginia Society of CPAs. Here are a few steps that may make it easier.

Determine how much you can afford

Before you apply for a mortgage, you should have a realistic idea of how much you can afford to pay. There are many online calculators you can use. If you apply for a mortgage amount that fits within your budget, you’re mortgage application is more likely to be approved.

Organize your documents

Lenders will want to know a great deal about your financial history before they give you a loan, so it’s important to organize all the documents you’ll need for your application. You may be asked for items such as pay stubs or other proof of income, tax returns and information on other debts, such as credit cards and auto loans. The application process will be faster and smoother if you have this documentation in order beforehand. 

Use existing credit wisely

It's a good idea to have some credit — whether it takes the form of a credit card, auto loan or other debt — but not to overdo it. How much is too much? As a general rule, you should use no more than 25 to 30 percent of your available credit. So, if you have a $2,000 limit on a credit card, don’t carry more than a $500 to $600 balance on that card.

Clean up your credit record

After the wave of loan defaults and foreclosures that have taken place in recent months, lenders now scrutinize loan applications to ensure that borrowers can afford to pay off the debt they are taking on. In particular, banks are looking for people with good credit scores. Your credit score is based on your financial situation and how well you have managed your credit in the past. If you’re uncertain about your ability to get a mortgage, it’s definitely a good idea to check your credit report from one of the three national credit bureaus. If your score is low, you may have trouble getting a mortgage or you may face stricter loan terms.

Repair your credit

There are two particularly important steps you can take to improve your chances of obtaining a mortgage. First, pay off some of your existing debts. If you have several credit cards and have charged the maximum amount on some or all of them, lenders will be more reluctant to give you credit. It’s also important to get into the habit of paying your bills on time. Both of these simple steps can raise your credit score and put you in a better position to get a loan.

Consult your CPA

Getting a mortgage can be a tough process these days. That’s why it’s a good idea to get advice from your local CPA. Your CPA can advise you on budgeting for your new home and improving your chances of qualifying for a mortgage.

The Virginia Society of Certified Public Accountants (VSCPA) is the leading professional association dedicated to enhancing the success of CPAs. Founded in 1909, the VSCPA has 8,300 members who work in public accounting, industry, government and education. The VSCPA is celebrating its Centennial anniversary this year — 100 years of an organized CPA profession and a strong organization uniting and representing CPAs across the Commonwealth. Visit www.vscpa.com/Centennial to learn more about the VSCPA’s Centennial Celebration. For general information, please visit the Press Room on the VSCPA website at www.vscpa.com, e-mail vscpa@vscpa.com or call (800) 733-8272. To search for a CPA in your geographic region, visit www.financialfitness.org and click on "Find a CPA."

© 2009 American Institute of Certified Public Accountants