Buying a home can be a fun and exciting experience. Finding the right home is just one step in the process. Some people don’t know the first thing about getting a mortgage loan. They hear reports of dropping interest rates and lower home prices and hastily decide to jump into homeownership.
The process of getting a home loan differs from getting a car loan or renting an apartment and applicants who don’t recognize these key differences are often disappointed when a lender denies their mortgage loan application. Choosing the right home loan can be just as important.
Here are some tips to help you finding the right home loan as easy as possible.
Save your cash
Requirements for getting a mortgage loan often change, and if you are considering applying for a home loan in the near future, be ready to cough up the cash. Saving up to make a large down payment shows banks and lenders that you know how to save. A large down payment reduces the loan-to-value ratio, which increases your chances of getting your loan approved.
Clean up your credit history
Some borrowers never review their credit history before submitting a home loan application and just assume that previous non-payments are forgotten. Credit scores and credit activity have a major impact on mortgage approvals. In addition to higher credit score requirements, several missed payments, frequent lateness, and other derogatory credit information can stop mortgage approvals.
You will need to maintain stable cash flow and avoid new debt. While you don’t need a zero balance on your credit cards to qualify for a housing loan, the less you owe your creditors, the better.
Avoid changing banks
Doing business with the same business bank for a period of time is another sign of stability.
Prepare all documents
When you apply for a mortgage, you will need to provide your lender with a number of financial documents. No mortgage lender will take you on as a customer unless you can prove who you are. Make sure that you have an up-to-date ID and that the address on all your IDs are correct.
Get Pre-approved for a mortgage
The mortgage pre-qualification process is fairly simple. Usually just requiring some financial information such as your income and the amount of savings and investments you have. Getting pre-approved for a mortgage loan before looking at houses is emotionally and financially responsible. On one hand, you know what you can spend before bidding on properties. Once you are pre-qualified, you will have a better sense of how much you can borrow and the price range of the homes you can afford.
Owning your own home entails a lot of responsibility and commitment. By accomplishing all the paperwork and making yourself financially presentable, the greater your chance of success in obtaining a new home loan.
Your mortgage constitutes the biggest, and perhaps most meaningful, financial transaction of your life. Many people have risen above credit problems, bankruptcy, foreclosure, and repossession specifically in order to purchase their first house. Just be sure to implement a realistic plan and stick to it. Educating yourself is key, and there are a number of ways to avoid this heartache and disappointment when applying for a mortgage loan.