Suppose you’ve been thinking about taking out a loan to buy a home. You can take steps to increase the likelihood that a lender will approve your mortgage application. Some of these actions may help you qualify for lower interest rates and avoid other extra costs. The right plan will also make it possible for you to pay your monthly bills reliably.
1. Set Aside Cash for a Down Payment
You’ll probably qualify for better borrowing terms if you save up at least one-fifth of the money you need to buy a house. However, some exceptions exist. If you’re eligible for an FHA loan, you only need 3.5 percent. Remember that a larger down payment will reduce your spending on interest.
2. Figure Out How Much You Can Afford
What is the maximum amount you could realistically pay each month? Remember to consider other ownership expenses, such as property taxes, insurance, water bills, and maintenance. Don’t apply for a loan with monthly payments that leave little income to spare. You should be able to repair an appliance or visit the dentist without falling behind on your mortgage.
3. Request a Free Copy of Your Credit Report
Take the time to thoroughly examine this document and check for errors, such as false information about late bill payments. Mistakes or identity theft could cause a lender to reject your application. They might also result in higher mortgage and home insurance rates that would needlessly raise your cost of living throughout the year.
If you notice any incorrect data, be sure to report it. You can do so by contacting the relevant credit bureau. It may take some time to resolve these issues thoroughly, so you shouldn’t wait until right before applying for a loan. An identity theft assistance service could help you address complex problems if you don’t have enough time to handle them independently.
Consider checking your credit score as well. If you have a relatively low number, you might need to take action to improve it before you will qualify for a mortgage. Lenders hesitate to approve applications from borrowers who already carry large amounts of debt. Think about paying off existing loans and credit card balances or finding a way to boost your income.
4. Gather the Necessary Papers
You can begin to do so when you’re almost ready to apply for a mortgage. A lender may want to see your tax return, monthly bank statements, and documents that verify your income. An employee will need different papers than an independent contractor, business owner, or retiree. Either way, you have to demonstrate that you can afford the monthly loan payments in addition to other bills.
Homebuyers in central Alabama turn to First Lenders for a wide range of borrowing options and a friendly staff with long-term experience and top-notch mortgage expertise. Our Albertville and Homewood offices consistently deliver superior customer service.