Applying for a mortgage can be a lengthy, nerve- wracking experience. However, it doesn’t have to be. Sure there’s a lot to it, but if you take the time to understand them, you can maximize your prospects of getting a mortgage. Here are some tips to improve your chances of going from prospective homebuyer to proud homeowner without a lot of fuss.
It starts with being financially ready
The childhood riddle “How do you eat an elephant?” has a simple answer- one bite at a time. Much of the same can be said for getting approved for a mortgage. And no bite or step is bigger than making sure you’re able to buy a home. Ask yourself how much house you can afford and if you have enough money for a down payment. A bigger down payment typically improves your chances of getting a loan and obtaining a lower interest rate. If you can put down 20 percent of the purchase price for the home, you can avoid having to buy mortgage insurance that private lenders often require when homebuyers have smaller down payments.
Take inventory, too, of your income, debts, monthly bills and credit history, and whether you have enough money for closing costs such as taxes, appraisal fees and title insurance.
Improve your credit before applying
Even if you have money for a down payment, a mediocre or poor credit score can hurt your chances of qualifying for a mortgage. But, there are things you can do to improve your credit, such as paying off credit cards and checking your credit report for errors.
Once you’ve determined you’re financially prepared to buy a home, you can move on to finding the right mortgage for the home you have your eye on. Financial institutions such as your credit union can provide handy resources to guide you through the process in easy-to-understand terms.
- Find the right lender: It’s always wise to shop around, but bear in mind that credit unions typically have better loan rates than banks.
- Get preapproved for a mortgage: A preapproval is proof that a lender has reviewed your financial documents- including pay stubs, W-2 forms, tax returns, bank statements, loan and debit information- and is willing to make you a loan, though it’s not an official commitment until you complete a fuller, more detailed loan application process. Getting preapproved lets a sellers know that you’re a serious buyer and will be able to make an offer on a home.
- Choose the right mortgage- a variety of mortgage options- government-backed loan or conventional, fixed-rate or adjustable- rate mortgage, loans with 15-year or 30-year terms- can seem overwhelming. Your credit union can help you choose the mortgage that is best for you.
- Submit the application- Here’s where the paperwork come sin. If you use the lender that has preapproved you, you’ll need to provide only your most recent financial documents to complete the loan process. If you go with a new lender, however, you’ll need to submit all of your financial documents again. After you have turned in your mortgage application, your lender will provide an estimate of how much your loan will cost, including fees and the amount you will pay or closing.
If you get to here, you have successfully maneuvered the steps for applying for a home mortgage. Now, the wait begins to learn whether you’re officially approved.
There are no guarantees, but if you do your homework and get prepared, you will maximize your chances for a successful mortgage approval.
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