Purchasing a property is one of the most significant investments someone can make in their lifetime, so it is essential to increase their opportunities. Whether you want to live in the city or the suburbs, the most important aspect is being able to purchase a property.
Lenders are making it a bit more complicated these days due to past mistakes, such as the housing market crash. Lenders had to wake up and realize they couldn’t just approve anyone that came to them. If you want to be approved for a home loan, you can do things before you start and during the process to make sure your home buying experience is a positive one.
There are handy and practical tips you can put into motion to prepare to be a homeowner and increase your chances of getting a mortgage.
In this article, we’ll tell you important aspects and tips to take into account.
Create a budget
Do you know how much you earn each month and where that money goes? If you don’t have a budget, how can you prove that you can afford a mortgage payment to a lender? Sit down and establish a budget. If you have a two-income family, then your budget needs to include both income and expenses. Keep in mind you don’t have to share accounts to have a solid budget.
Pick your ideal mortgage type
A mortgage is a long-term financial commitment, so you must choose the right type for you and your family. It is also important to consider your options if it comes to getting out of your mortgage, planning is the best way to make a responsible purchase, as well as knowing important information that can be useful as a backup plan in case you can’t commit to your mortgage.
There isn’t just one type of mortgage. In fact, you have a few options. The two most common types of mortgages are fixed-rate and adjustable-rate. Each has its own set of guidelines that may be beneficial to your circumstances. If you are a retired veteran, look into a VA home loan first. Also, if you are a first-time homebuyer with good credit, you may qualify for a FHA loan. It’s essential to know all terms of each mortgage type, and it can be beneficial to hire a professional to help you align your mortgage type to your financial situation and goals.
Knowing the mortgage types and knowing what you need and what suits your budget will be very helpful to pave the way toward a home loan.
Decide if you want a broker or lender
There are advantages and disadvantages to hiring a broker versus a lender. A broker is in regular contact with many lenders and banks, which will save you from calling different lenders to compare terms and rates. A broker will save you time and take care of the process for you. Because brokers have connections with lenders and know what it takes to get a home loan approved, a broker may be able to (somewhat) negotiate with lender fees and services on your behalf. When deciding whether you want to hire a broker, ensure that their financial interests and goals match yours. Being on the same page is important to ensure you get the right mortgage for you as the homeowner.
A lender will deal directly with you and your loan, which can speed up the process rather than having the middleman broker as a step. If you really want to be approved and you’re new to home buying, you may want to go with a broker. However, if you already know you’ll be approved and this isn’t your first home buying experience, then going straight to the lender may work better for you.
Know your credit
You need to not just know your credit score, but what is on your credit report. Even a great credit score can be denied if you have any negative items on your report, including late payments or judgments. Review your report to make sure it’s accurate and correct inaccuracies before you apply for a loan.
Get the paperwork in order
When you apply for a property loan, you have to bring a lot of paperwork. Gather this all up to avoid any slowdowns in your approval process. Some documents your lender will need to see include:
- Two forms of identification per applicant
- Federal tax returns for the last two years
- W2 earning statements for the last two years
- Proof of any assets you currently hold
Being approved for a home loan can be easy when you follow the right steps. There are plenty of resources out there based on the type of loan you’re applying for (FHA, VA, Conventional, etc.). Use these resources to guide you through the process. If you are a first-time homebuyer, read more about the home loan process or get connected with a real estate agent. The more educated you are, the more likely you are to be approved and know what it takes to be approved the first time around.
