Getting a home loan can often be a tedious process, especially with all the hoops you have to pass through before getting your application approved. Well, that’s nothing new. After all, it is part of every lender’s standard operating procedures to assess whether you are a worthy borrower.
That’s why it’s important to be adequately prepared and have all the necessary requirements ready ahead of time. This will give you a higher chance of getting an approved loan application. With that in mind, let’s walk through some of the most helpful tips that can help you prepare when applying for a home loan.
1) Assess Your Present and Near-Future Financial Capability
A home loan is a long-term financial commitment. There are different options, but some can go as long as 15 to 30 years. If you think about it, a home mortgage can be the majority of your adult life. That’s why you need to think hard if you are going to finance a home loan. You don’t want to risk your home being foreclosed in case you default on the payment.
Assessing your financial capability now is crucial because most home mortgage loans require a down payment. That’s often expressed as a percentage of the loan amount. Do you have enough cash for the down payment? Now, think about the future. Think about stable employment and future sources of cash flow.
2) Review Your Credit Report
A credit report summarizes your credit activity, starting from obtaining credit up to repayment of your debt. You can get a copy of your credit report from the three credit bureaus: TransUnion, Experian, and Equifax. Reviewing your credit report is important because lenders will review your credit practices.
Moreover, you can also check your credit score. The commonly used credit score that most lenders use today is the FICO score. FICO scores range from 300 to 850 or from poor to excellent. In general, having a FICO score ranging from 639 to 670 is okay. Both your credit report and score will significantly affect your loan application.
If you have a bad credit history, consider other financing modes or take a credit builder loan instead.
3) Research Available Home Mortgage Products
If you think your credit report is fair and acceptable, it’s time to think about what home mortgage product to get. There are many products available out there. Each home loan product varies in interest rates, payment terms, and down payment. There are 30-year and 15-year home mortgage loans. For people with below-average credit standing, they can get an FHA loan instead.
Veterans and military service members can get a VA loan. If you’re qualified for a VA or FHA loan, you can narrow your choice to fixed-rate mortgages, adjustable-rate mortgages, or jumbo mortgages. Each type has its unique features and characteristics. Find which type works best for you.
4) Decide on Your Financing Structure
A home mortgage contract requires a down payment except for a VA loan. The amount of down payment will dictate how big your monthly payments will be. If you opt for a smaller down payment, you’ll have larger monthly amortizations. The opposite is true for larger down payments. However, it’s advisable to maximize your down payment to enjoy lighter monthly payments.
5) Get Expert Advice
If this is your first time applying for a home loan, you definitely need an expert realtor in your corner. They can look through your application documents, provide expert advice, and even offer any necessary assistance using their wide network of connections in the real estate space.
Already got your pre-approval but haven’t found your dream home yet? Here’s how to find and close a new home before your pre-approval expires!
At Reach Home Loans, we can help you understand how home loans operate and make the best possible decision based on your housing needs. Additionally, we offer plenty of beginner-friendly home loan products that can fast-track your journey to homeownership. Let’s get started with your application process today. Give us a call at 954-703-1465 to get started.