Buying a house through a home loan isn’t one of the easiest things to do. The hurdle of finding a good mortgage plan that suits your budget and level of income can be quite frustrating. If this is the first time you are planning on buying a home, then there are few things you should know before making the biggest purchase of your life. Here are seven prompters you should check before signing that document for a mortgage.
Pay all your debts before hand before mortgage application
When applying for a home loan, it’s important you have a good credit history, which includes paying all forms of debt you may have incurred on time, every time. A late payment may negatively affect your credit score. That can play a part in whether you’re approved for financing and ultimately, the rate and term you may receive.
Should you be done with your payment, you should keep a clean slate as you may have to go for other loans the next time.
Be Chary of Employment Changes
A stable employment history is important when preparing to buy a home. After all, you have to show that you have the stability and continuity of income to repay the loan.
Requirements may vary based on the type of employment you have, but for most salaried borrowers, there is no specific time on the job required. An employment history of two years and over would be best to gain you a home loan. Most lenders are guaranteed a stable source of income for repayment of your loan with more years of work history. Based on your situation, you may be asked to provide additional work history and income information.
Choose your Home Loan Plan Carefully
Just as it’s important to research all your loan options, it’s also important to spend a little time looking into potential lenders as well. Just focusing your research on the background of the lender to the interest rates they are willing to lend to you would be a big mistake.
It’s better to spend 40 days researching a lender than 40 years repaying a loan that could have been paid in 20 years. Here are some things to keep in mind when looking for a lender:
- A sense of understanding of the loan options available
- What options are available in rates, points and less
- The company’s reputation
Hold Off on Opening New Accounts
If you’re looking for a new home, there’s a good chance you’re going to be looking to furnish and decorate it as well. It would be best you do not open a new account just to get that home loan because your lender may want to review your credit history which a new account may not have and jeopardize the chances of your getting the loan.
Do Your Own Research
With so many home loan options available, it may be difficult to determine the one that’s right for you. Though home loan experts may assist you to choose the right option for you, it’s incumbent that you research on the types of home loan plans available as to it being at a fixed interest rate or a variable one over the mortgage period.
See What You Can Afford for a Home Loan
After you’ve taken the time to do your own research, it’s time to see how much you can afford to spend on a home. The mortgage calculator which is available on most websites and online could be a best tool to assist you know what percentage of your income could be spent on your home loan monthly and what falls within your budget. Every situation is different. You may have costs in your monthly budget that affect your bottom line. The important thing is to find a monthly payment that you’re comfortable with.
Hold Off on Closing Existing Accounts
Each item on your credit report contributes to your credit history or the record of your responsible repayment of debts. The longer your credit history, especially with a good payment record, the better. When applying for a home loan, don’t close your existing accounts, even if they have a 0 credit balance.
While no two clients are the same, following these tips may help set you up for success for a simple and smooth home buying experience.
Some excellent tips on what to do when applying for a home loan. Hope it was helpful. Enjoy!