Buying a house is something that most people have on their list of goals to accomplish in their lives. In most cases, buying a home is the largest purchase and financial investment you will ever make. Of course, in order to get a home, a large majority of people will require a mortgage to do so.
While it would be lovely if everyone who wanted a mortgage could get one, this isn’t the case. It can be difficult to get a loan. Even if you do get one, there are no guarantees that it will be high-quality. Thankfully, there are some things you can do to give yourself the best chance of success when it comes to getting a home loan.
With that in mind, this blog post is going to go over 4 great tips to ensure you get a home loan.
Make Sure Your Credit is in a Good Place
The first tip is to make sure your credit score and credit report are in a good place. A good credit score makes you less risky to lenders, and the opposite is true for bad credit history. The better your credit, the more likely a lender will be willing to work with you. Not only that, but a good credit score can also impact how expensive your mortgage is. The best rates and terms are often reserved for those with excellent credit.
So before you attempt to get a mortgage, you should attempt to improve your score and deal with any credit-related issues. For example, you will want to correct errors before you apply for a loan. Doing this requires you to get a copy of your credit report, and review it to ensure everything is good.
You are entitled to one free copy of your credit report each year, and we recommend you use it. The errors can be anything from an incorrect name, an improper balance or a wrong account, so be sure to review the report closely. If you find an error, report it back to the credit bureau.
Shop Around for the Right Lender
Of course, another tip to ensure you get a good home loan is to shop around for the right lender. Not all lenders will be willing to work with you, so the more you visit, the better your chances of success will be. This is especially true for borrowers who might have an average or below average credit score.
Also, the quality of lenders can differ. You want to borrow from a lender with a good reputation, one that offers good rates and terms, and is a company or individual that you feel comfortable working with. If you simply go with the first lender you visit, there is a good chance that you will end up leaving a better offer on the table somewhere else.
Pay Down Any Debt You Have
When you take on a mortgage, it will be a long term debt that you will be paying off for the next couple of decades. As a result, you will want to reduce the debt you are carrying as much as you can before getting a mortgage. If you already have a ton of debt, adding a mortgage on top of it can be a lot of financial strain on your household.
In addition to this making it easier to comfortably afford your mortgage, the amount you can borrow for the mortgage will also be dictated by your debt. If you already have a lot of debt, most lenders will limit the amount they will give you. You don’t need to be completely debt free to get a mortgage, but it doesn’t hurt to get as close as possible.
Have a Larger Down Payment
The more money you have to put up for a down payment, the more likely a bank or other lender will be willing to work with you. This is because a larger down payment often means less risk to take on for a lender. Also, the larger your down payment, the less you actually have to borrow.
While it is always a good idea to have a down payment of 20% to avoid PMI (private mortgage insurance), this isn’t always viable. If you cannot reach the 20%, you should attempt to have as large a down payment as you can comfortably afford to improve your chances of being approved and having a more manageable payment.
In conclusion, we hope that this article has been able to help you learn a couple of helpful tips to ensure you can get a home loan.