For most, getting into their own homes relies upon the amount of money they can get from a lender because the prices are simply out of reach without help. The trick is to find a lender that will work with you and give you the best rates for the loan. Just because interest rates are starting to rise does not mean that you cannot get the cash that you need.
Going through a lender is an excellent option to solve the financing problem if it is approached correctly. There are some common things you will need to ensure that you do, as well as a few things you want to avoid. Let’s take a look so you can go into the process with your eyes wide open.
What To Do While Applying For A Home Loan
It is essential for you to know some things you should be doing from the start, even before you start filling out the application for loans. Not everything will apply to you, and not all of them will need to be completed. However, you should still go through each and every list item just to increase your chances of getting a reasonable rate on a loan from your choice of lender.
- Do A Budget – You will need to have a budget made up for the lender that you will be going through, but it is also important for you to know how much you can afford to pay out before you attempt to get financed.
- Do Check Your Credit Score – The better your credit score is, the better your chances are of getting a home loan. Plus, that home loan will offer you much better rates.
- Do Improve Your Credit Score – While looking through your credit score information, see if there is anything that is not there. If something appears wrong, fix it. If there is anything that you can do to improve your numbers, get it done before attempting to get a loan. Remember, the higher the score, the better off you will be.
- Do Save For A Big Down Payment – It is vital to have a sizeable down payment because you will not need to acquire a loan for as much money, which decreases your payments and the length of those payments.
- Do Get Preapproval – One of the most common questions during the process will be, “how much can I borrow on a home loan?” This, of course, is a great question, and the only way to answer it is to get preapproval from the lender you plan to use.
These are the top 5 things that you need to make sure that you do during the home loan process. This task is like any other that you will do in your life, meaning that preparation is critical. You never want to jump in without being prepared.
What Not To Do When Applying For A Home Loan
There will always be some things to avoid during the home loan process, and even though some may seem pointless or trivial, they are essential. You want to enter into the loan process with your eyes open and never take anything for its face value.
- Don’t Take The First Offer – Even if you have a favorite lender that you like to go through, never take the first offer that you get. Go to an online comparison site, such as iSelect, and get several offers to look through. Not all loans will be the same, and not all of them will give you the same interest rates. You need to compare the details and the interest and choose the best one.
- Don’t Change Jobs – Part of your credit report that they will be looking at is your job history. They want to know that you are stable and that the earnings income you provide them will be correct a year from then. The longer you hold a job before applying for a home loan, the better off you will be.
- Don’t Open New Credit Accounts – The lender will use a formula to see how much credit you have available compared to how much you use. You want credit accounts to have some activity to show that you are responsible for paying them, but you don’t want to have any recent activity when it comes to opening one.
- Don’t Take Cash Advances – You never want to take a cash advance before applying for a home loan, even to help pay the down payment. This will show the lender that you do not have the down payment saved and suggests that you may not have enough money left over at the end of the month to pay for another big payment, such as a home loan.
- Don’t Forget About Extra Fees – There will be some fees that you will need to be able to cover, so keep enough money held back to cover them. Home inspections and closing fees are a couple of them that are important aspects of the process.
These five don’t tasks need to be combined with the do’s from above to ensure that the loan process goes smoothly. You never want to ignore any part of them that may give you a lousy interest rate or even a denial.
Final Thoughts
When applying for a home loan, it is crucial to ensure that your credit, finances, and history are all in order. Do not overreach for a home you know you cannot afford, and always give the lender the correct information.
Even if you think it would be a good idea to claim more income than you have, it can get you into some trouble with the lender. It could put you into a situation where you cannot make the hefty payments you agreed upon. Be honest, be upfront, and follow the steps that the lender you have chosen to go through wants.
