If you are reading this right now, it’s most likely the answer to the above question is a “yes.” You are not alone. Many people find the whole procedure of getting a mortgage loan difficult, time consuming and draining. The truth of the matter is getting qualified for one is the hardest part, and choosing the right one for you will be the most time consuming one. Part of what makes it so hard to qualify for a home loan is that you need a lot of previous preparatory work beforehand in order to get yourself to a position where you qualify well enough for a good home loan deal. It will be most helpful to keep these tips in mind when you are starting to get a good look at your home loan options.
First of all, you need to be the kind of candidate that manages really well in order to assure lenders enough to want to loan you money. Essentially, if you are showing to them that you cannot handle money very well, they will have less of an incentive to want to give you the money. They look for several things that give them these indications. First of all, there is your credit score. It tells them a lot about how you responsibly handle your money. If right now, your credit has some dings to it and it doesn’t look presentable, there are ways to bring it up. Pay off your credit card debt, and make sure you keep up with all of your other debts. Over time, your credit score will start to look good again. Secondly, they will want to know about your monthly income and your monthly expenses. They want to see what kind of debt-to-income ratio you have. A high one indicates that you are overspending your monthly income too much on your current expenses, and if that’s the case, it tells them that you will not have enough money left over to pay the mortgage. It’s a good idea to understand what you are able to afford, in other words. Once the mortgage kicks in, it will not be the only thing related to the house that you will have to worry about. There is also the homeowners insurance, the utilities, the property taxes and occasional maintenance costs. There is also the potential weather disaster that will force you to dig into emergency funds (if you have one). So you see, if you are not managing money very well right now, it’s imperative that you start getting into the habit. You will eventually find a good flow to money management, and then you will be better prepared for a mortgage.
You will need to give lenders and brokers financial documents relating to your financial history, not just the credit score. They will want to have copies of your W-2s, your recent pay stubs and bank statements and tax returns. The more you have to give them through your documents, the better chances you have to be able to qualify for the mortgage loan. It’s also a good idea to get them organized now – once you start applying for the home loans, the process will run better and faster when you have it all prepared already.
More on money management, it’s important that you start saving for a down payment. They can be very expensive, and many lenders will ask to provide 10% or up to 25% of the cost of the house. It’s a lot of money, yes. There are options for low-income families through the FHA home loan. But even so, saving money for a down payment not only makes you look for responsible with your money, but it will help the loan process as well. The more you can give for a down payment, the less you will to borrow, and this will help you out as you shape the payment plan. The less you can pay overall back to the lender the better, right?
Relax and look through your options once the process has begun. You have the right and choice to talk to many lenders. Don’t rush and feel obliged to take the first offer you get. See if there are other options out there that may serve you better. Lenders after all are not looking out for your benefit. Spend the time and effort to talk to many and pick out the best loan offer for yourself, whether it be the kind of interest rates they have, the extra fees on the fine print, or even the monthly payment strategy. Talk to a housing counselor or a real estate lawyer to get some professional opinions, and it can save you hundreds to thousands worth.