Owning a home is a huge responsibility which shouldn’t be taken lightly. The first step is often to get approved for a mortgage, but there is a lot to learn before you dive right in. People who have taken mortgage in the past have contributed their knowledge to this article so you can learn how to avoid the mistakes they’ve made, so read on.
There are loans available for first time home buyers. These loans usually do not require a lot of money down and often have lower interest rates than standard mortgages. Most first time home buyer loans are guaranteed by the government; thus, there is more paperwork needed than standard mortgage applications.
Get pre-approved for a home mortgage before shopping for a new house. Nothing is worse than finding the perfect house, only to find out that you can’t get approved for a mortgage. By getting pre-approved, you know exactly how much you can afford. Additionally, your offer will be more attractive to a seller.
Don’t make any sudden moves with your credit during your mortgage process. If your mortgage is approved, your credit needs to stay put until closing. After a lender pulls up your credit and says you’re approved, that doesn’t mean it’s a done deal. Many lenders will pull your credit again just before the loan closes. Avoid doing anything that could impact your credit. Don’t close accounts or apply for new credit lines. Be sure to pay your bills on time and don’t finance new cars.
Be sure to compare the different term options that are available for home mortgages. You could choose between a number of options, including 10, 15 and 30 year options. The key is to determine what the final cost of your home will be after each term would be up, and from there whether or not you would be able to afford the mortgage each month for the most affordable option.
Never let a single mortgage loan denial prevent you from seeking out another loan. One lender denying you doesn’t mean that they all will. Keep shopping around to check out your options. Most people can qualify for a mortgage even if it means they need a co-signer.
Keep your job. Lenders look into many aspects of your financial situation and one very important aspect is your employment income. Stability is very important to lenders. Avoid moving jobs or relocating for as long as possible before you apply for a home mortgage. This will show them that you are stable.
Lenders look at your debt-to-income ratio in order to determine if you qualify for a loan. If your total debt is over a certain percentage of your income, you may have trouble qualifying for a loan. Therefore, reduce your debt by paying off your credit cards as much as you can.
Ask loved ones for recommendations when it comes to a mortgage. They are probably going to be able to provide you with a lot of advice about what you should be looking for. Some of them may have had a negative experience that you can avoid with their advice. The more people you ask, the more you can learn.
Balloon mortgages are among the easier ones to get approved for. It’s a short term loan and will be refinanced as soon as the term is up. This can, however, prove to be quite risky as rates may increase, or your finances may take a turn for the worse.
Do not close out any credit card accounts while you are in the middle of applying for a loan. This will negatively impact you since all of your credit cards were used when determining your eligibility for a loan. If you need to close your account for any reason, wait until the loan process is over.
Avoid paying Lender’s Mortgage Insurance (LMI), by giving 20 percent or more down payment when financing a mortgage. If you borrow more than 80 percent of your home’s value, the lender will require you to obtain LMI. LMI protects the lender for any default payment on the loan. It is usually a percentage of your loan’s value and can be quite expensive.
Rebuild or repair your credit before shopping for a home mortgage. A good credit history and credit score qualifies you for a better interest rate. It is also frustrating to find the perfect house but not qualify for the loan you need. Taking the time to fix your credit before buying a house will save you money in the long run.
Now that you’ve read about the truth when it comes to getting a mortgage, you will avoid the hurdles which tripped up your peers in the past. Their struggles will make your mortgage application process smooth sailing. Be sure to use these tips, otherwise you will face the same perils they did.
