The purchase of a home is the largest transaction most people will make in their lives. It can also be a challenge at times for potential homebuyers to find the financing they need to facilitate a home purchase. Fortunately, there are a number of steps you can take to improve your prospects of receiving a home mortgage loan.
Taking the time to get pre-approved for a home mortgage will allow you to make an offer on a home as soon as a house that interests you becomes available for purchase. Many times an agent will ask you to get pre-approved through a mortgage broker when you seek their help in finding a house. It may help your cause to be proactive and get this pre-approval before reaching out to an agent.
The benefit of mortgage pre-approval becomes evident when you consider the fact that 92 percent of the people who received financing for a home over the last year had been pre-approved at some point in the process.
Know Your Credit Score
Your credit score is critical to your chances of getting a loan to purchase a home. Your score will also determine how much you ultimately pay for a mortgage because it will be used to establish the interest rate on your loan. If there are problems with your credit, you will be able to work on this if you check your credit report early in the process.
It is a good idea to review your credit report before seeking mortgage financing even if you believe there is no problem.
Pay On Loans
You should be sure not to miss any payments on loans or other debt if a home purchase is in your near future. Late payments will remain on your credit history for six years and will greatly affect your mortgage application process.
If you have paid your debts on time but still have loans outstanding, it may help to pay them off before applying for a mortgage. Lenders will take your monthly financial obligations into account when deciding how much money they are willing to lend you to buy a home.
Save For a Downpayment
It is not always easy for potential homeowners to save the money they need for a downpayment on a home. However, doing so will greatly improve your odds of being approved for a mortgage loan.
A downpayment of 20 percent or more is a good indicator to a mortgage lender that you are serious about purchasing a home. A sizable downpayment will also decrease the loan-to-value ratio and make it more likely you will receive the loan you desire.
Stay Away From Odd Properties
Lenders appreciate knowing they can recoup their money in the event you default on the mortgage loan. This fact makes them less likely to provide mortgages to buyers who want to purchase properties that are considered a little unusual.
These properties may be difficult for them to sell off if it ever becomes necessary for them to do so. Some properties you might want to approach with caution include flats that are located on top of commercial businesses, homes constructed with non-standard materials, and buildings that are old or unusual.
Know the Mortgage You Want
There are a variety of mortgages available to future homeowners. You should identify which of these mortgages best fits your needs before involving yourself in the homebuying process. Options include:
- Fixed rate mortgages.
- Adjustable rate mortgages.
- Interest only mortgages.
- Balloon mortgages.
- Combo mortgages.
- Jumbo mortgages.
Once you know which mortgage best fits your need, it is time to search for a deal. Finding the right deal is important because it can save you tens of thousands of dollars. There are a number of ways you can compare mortgage offers but it may be a good idea to use a mortgage broker to do this leg work for you. Brokers are experienced at finding the best deals for clients and are aware of mortgages that may not be offered directly to mortgage seekers.
The Bottom Line
Buying a home is a huge step for most families. It is essential that potential homebuyers prepare themselves for the task of obtaining a mortgage. The seven tips above are a great place to start for anyone seeking to navigate the home mortgage process.