Posted on: 31 January 2023Share
If you are getting ready to purchase a home, applying for your mortgage is one of your most significant steps. But there are also several other things you must do before applying. Doing some of these things will help make the application process go much smoother and help ensure your loan approval. Here are a few suggestions.
1. Request All Three Credit Reports
Credit is one of the most essential components when applying for mortgage loans. Not only will a good credit score ensure the approval of your application, but it will also qualify you for better loan rates.
Credit scores can vary from one reporting agency to the next. There are three major credit bureaus that your lender may request reports from. These are:
Checking your credit reports will ensure your credit report is as accurate as possible. You can request a free report from all three agencies.
Requesting your reports in advance will allow you to dispute any inaccuracies, know your debt-to-credit ratio in advance and address any possible indicators of identity fraud.
2. Research, Research, Research
Applying for a mortgage loan is a huge commitment. You want to ensure you get the best rates, terms, and conditions. The difference of half of a percentage point rate can equate to thousands of dollars over the life of your loan.
For example, a $300,000 thirty-year loan with 20% ($60,000) down at 6% will run you approximately $1,438.92 per month for a total of $518,011.65. But if you qualify for a 5.5% loan with the same terms and conditions, your monthly payment will only be $1,362.69 and a total of $490,569.70. That is a difference of more than $27,000.
3. Educate Yourself on the Financing Types, Terms, and Conditions
Will you take out a 15 or 30-year mortgage? Will you go with an adjustable or fixed rate? What are the pros and cons of both? Knowing the answer to these questions may determine which mortgage lender you choose.
4. Decide How Big of a House You Can Really Afford
Most people dream of a big house, but that is not always a realistic starter home dream. Housing prices in your area, down payment money, credit rating, and available financing will all factor into how bihouse you can afford.
The good news is, in most areas of the country, you will begin to build equity in your home as soon as you purchase it. After you live there a few years, these are funds you can use towards a larger house in the future.