Purchasing a new home is an exciting time for everyone. It can sometimes be a challenge to just stop daydreaming about how great your new home will be. As exciting as it might all seem, don’t get too carried away and end up going into home ownership blind.
Here are some home loan tips to help you get all of your ducks in a row first. If you follow these simple steps, you’ll have a better chance of your mortgage application being approved and getting the best home loan possible.
Get Your Credit Score
You’ve been paying your credit card, auto loan, and other bills on time every month. Your credit score is probably high enough, right?
There is no way to know for sure unless you actually pull your credit score. With many factors influencing your score, it’s difficult to predict what yours will be without actually pulling it. Plus, identity theft is real, and can severely impact your score – without you even realizing it.
Get Your Financial Documents in Order
The home loan process is complicated and full of documents. Not only that, but sometimes you have to move quickly to take advantage of a low interest rate. Go into the process with all your documents prepared, and you’ll have a much easier time fulfilling requests in a timely manner.
For starters, you’ll need your most recent W-2, your last two pay stubs, tax returns for the last two years, and current statements for all bank accounts.
Don’t head out to look at new homes without a pre-approval first. You need to know how much the bank will loan you and approximately how much your payments will be. Otherwise, you could end up falling in love with a home that is unfortunately out of your reach.
Know What You Can Afford
It’s not uncommon for banks to approve you for more than you can actually afford. Take a look at your lifestyle and how a new mortgage payment would factor into that. Understand your personal maximum (it may or may not line up with the bank’s pre-approval), and begin looking for homes that fall under that highest number.
Be Prepared with Cash
Except with a few specific financing options, you’ll need a down payment for your home purchase, and you can usually expect to put down at least 3.5% of the purchase price at a minimum.
You’ll also need money for a home inspection, home appraisal, application fees, and other closing expenses.
Don’t Change Your Employment
Lenders use the information you provide at the time of application for loan approval or denial. If you get approved, don’t change your employment or income status until after the loan process is complete. Changing your employment or income during the process will significantly delay the lending process at best, and at worst, it could cause you to be denied for your loan altogether.
Handle Your Debt
Come into the loan process with as little debt as possible. Lenders evaluate your debt-to-income ratio when determining if they’ll give you a loan. Your monthly debt payments shouldn’t be greater than a certain percentage of your monthly income, and you can get a better rate if your debt-to-income ratio is lower.
In addition, don’t add to your debt during the loan process. Lenders will pull your credit again before closing, so wait to make major purchases until after you have closed.
Applying for a home loan can be both an exciting and stressful event. If you prepare yourself financially though with these important home loan tips, you can take most of the stress of out the process altogether.
Let the home loan specialists at Cascade help make the process as easy and stress free as possible!