Many people are new to the home buyer market, and they have no idea how to apply for a mortgage loan to procure their first property.
A prospective homeowner may read about dropping interest rates and/or lower home prices in a newspaper and just decide to jump onto the homeownership bandwagon. However, it is pertinent to note here that the process of getting a home loan is markedly different from, let us say, applying for a car loan or even renting an apartment.
Unfortunately, many applicants don't understand the more important aspects of the home loan process. They often become disappointed when they realize that the lending agency has denied the mortgage loan application.
Educating yourself about home mortgage protocols is absolutely critical to avoid the heartache and disappointment of a loan application rejection. These tips will help ensure that your application sails through without any hindrance.
Find out Your Credit Score
You will have to pull your credit score and find out your total credit history. There are many financial websites out there that can help you figure out your score. Remember, if your score is not high enough, the lending agencies might not be interested in working with you.
Save Up Beforehand
Different lenders have different requirements for disbursing a mortgage loan. You will almost certainly need to pay for down payments and other fees. If you don't have any liquid cash on you, the odds are that they will reject y our application. These days most mortgage lenders are cautious and require a down payment.
Don’t Jump Careers Too Often
If you leave your job or switch careers while your loan is being processed, it will create an unfavorable impression, and the lender might rethink their original assessment. It is imperative that you should stick to the same employer while going through your mortgage approval and home buying process.
Any changes in your employment status before the disbursement of the loan may have a negative effect on it. This holds particularly true if you take a lower-paying job or quit to become self-employed.
Pay Off Your Debts and Avoid New Ones
A zero balance on your credit card is not a mandatory requirement to qualify for that prized mortgage loan. However, you may rest assured that the less money you owe to your creditors, the better it will be for your mortgage application. If you are already in heavy debt, they might cancel altogether, at least till you become solvent again. The landing agencies have to protect their investments, after all.
Try to Get Pre-approved for Your Mortgage
It makes sound financial sense to try and get pre-approved for your mortgage loan long before you start looking around for the home of your dreams. This way, not only will you know what you can spend before bidding on different properties, but you can also avoid falling in love with a house you cannot afford.
You Should Be Well Aware of What You Can Afford
Sometimes many lenders tend to pre-approve applicants for amounts in excess of what they can afford. Here, you will have to remember that the larger the loan, the more you will have to pay back. Even if a lending agency is being unusually generous, you will still have to pay back both the principal amount along with interest.
This is why you mustn’t let the lenders dictate what you should spend on your loan. On the contrary, you have to be smart and factor in not just your income streams but also your day-to-day expenses such as daycare, groceries, insurance, or fuel.
Find a Reputable Realtor
While it might be really tempting to look up a house for sale online and try to go about the task entirely on your own, there are many things you might miss when you visit the house. Check to see if the agents have any experience in the type of house you are interested in, or if they know their way around your target neighborhood.
If you like the house, but the neighborhood is not as per your lifestyle, it might create a problem, and you would be stuck in a place you don’t like. This is irrespective of the amount of the loan.
However, a realtor who listens to all your requirements and tries to find not just the right home, but the right locality and neighborhood would definitely be worth the fees.
Learn All the Relevant Terminology and Always Be Punctual
Just like every other industry, the real estate and mortgage lending sectors are also loaded with all kinds of trade-specific jargon. If you don't understand something, just ask a question. Here it is deemed prudent to understand that there is no such thing as a stupid question. Since you are going to be making the single most important purchase of your life, there is absolutely no room for complacence.
A home mortgage loan requires a lot of documents, meetings, and phone calls. If you are not able to provide the relevant documents or are too busy to show up for interviews, the odds are that you might miss out on the home of your dreams.
Read the Fine Print
Virtually, all mortgage loans and related transactions tend to be quite document-heavy: Sometimes, they may include pages and pages of fine print. Even if it looks boring and seems generic, you will have to go through it word by word lest you miss out on something important. You must remember to read each and every word before you sign on the dotted line.
Become Friends with Your Mortgage Broker
If one were to reduce all of the other tips discussed above to just one, then it would be this one. Your loan brokerage firm will have a direct impact on your ability to purchase a home as well as your understanding of the whole process. Your brokers will start working for you even before the realtor and will help you understand what you can and cannot afford. They will recommend the perfect property and loan products so that you will be able to enjoy your new home for decades to come.