When the time comes for you to buy a home, there are a lot of things to consider. You have to have an understanding of what a mortgage is and which type will best fit your needs and financial situation. You have to choose a lender, and know how to adequately fill out their mortgage application. You need to have certain information readily at hand, such as your income, assets and liabilities, as well as a full description of the property you are interested in. All this can put a strain on you, but there are some steps you can take to prepare.
How To Begin Applying For A Home Loan
All other issues aside, the very first step you should take is to research different lenders and compare their loan rates. This can easily be done online, as most of the big lenders have websites that were created specifically for the purpose of outlining their mortgage details. This will provide you with a strong basis of what types of offers are out there, and you won’t easily be talked into a mediocre loan.
Another important step is to make a budget. This may seem like dispensable step, but it definitely isn’t. You need to know exactly how much you will have after your regular monthly payments for your mortgage payments. This is something the lenders will ask you about, and if you don’t have a set answer, you’re likely to lose out on some credibility.
Get Pre-Approved Before You Apply
Your chances of getting a good rate on your mortgage increase drastically if you’ve been pre-approved before you apply. You can do this by sending a specific set of information to the lender you’ve chosen. These documents include:
• Your two most recent W-2 forms
• Your most recent pay stub
• Most recent federal tax returns
• And bank statements from all of your accounts
Getting pre-approved can take some time, so don’t be put off if it takes a while before you hear back from the lender. The process can take anywhere from between a week to a month, depending on the lender.
What Lenders Look At When You Apply For A Home Loan
There are certain red flags that lenders will look for when you are applying for a mortgage, and it’s helpful to know them well in advance. Below are a few things you should definitely do, or definitely avoid doing (if possible) before you apply:
• Avoid making any big credit purchases- this is a huge red flag for lenders. If you have made a recent purchase on credit, it’s probably a good idea to wait until you’ve paid all or most of it off, since one of the main things they’ll be looking at is your total existing debt.
• Don’t try to hide your financial history- being dishonest with your lender is a terrible idea. Fully researching your credit history is part of the process, and it’s very difficult to conceal any financial blunders you may have had in the past. While lying may seen to open the door to better interest rates and lower monthly payments, the lender eventually will find out the truth and most likely reject your application halfway through the process, leaving you with the bill for a non-refundable down payment and non-refundable application fee.
• Have a stable Job- lenders are looking for applicants who have held a job with the same employer for at least 2 years. You want to be able to prove you are capable of steady income for long periods of time, so changing jobs too frequently won’t look good.
- 499 or lower- you won’t be able to get a mortgage with this score
- With a score between 500 and 619 you can get mortgage, but it’s probably not a good one. The interest rates will undoubtedly be high and it’s recommended you try and repair your credit before applying.
- Between 620 and 659 you can get a sub-prime loan or a prime loan, depending on some of the other qualifications listed above.
- The best score you can have is from 660 to 720 or above, and with a score like this you will be offered premiere rates and low monthly payments. However it should be noted that these scores are above average and rather hard to achieve and maintain.
Am I Fully Prepared To Apply For A Mortgage Loan?
Even if you meet all the above criteria, there are still other factors that could affect the decision of the lenders. Have you considered down payments and closing costs?
The best way to be sure of your specific situation is to speak with a trained professional about your plans to take out a mortgage. Let us do all the hard work for you. Just fill out our free contact form and one of our representatives will contact you promptly.
