While some people have the financial means to purchase a house with cash, the vast majority of homeowners must secure a home mortgage loan in order to buy a house. Applying for a home loan can be stressful, but being prepared can make the process smoother and increase the likelihood of being approved for the loan. If you're planning on applying for a home loan soon, use the following tips.
Know Your Credit Score
A few months prior to applying for a home loan, it is important to check your credit score. Lenders often place a lot of importance on a credit score, as a person's credit score can tell them a lot about a person's ability to pay their monthly mortgage payment. Checking your credit score will give you a good idea of whether or not you will be approved for a home loan. It is also important to examine your credit report to make sure that there are no errors that may be lowering your credit score.
Improve Your Credit
If your credit score is less than you hoped it would be, it is in your best interest to do what you can to improve it before you apply for a home loan. If you have high credit card balances, pay them down as much as you can to help boost your credit score. Accounts that are in collections are reported to credit reporting agencies, so it is important to pay them off before you apply for a loan.
When you know that you'll be applying for a loan, start keeping extra money in your checking and savings accounts. Mortgage lenders will want to see that you have cash reserves available since this will help indicate that you're financially responsible and have the means to pay your monthly mortgage payment.
Avoid Making Large Purchases
The last thing you want to do before applying for a home loan is finance a large purchase or run up large balances on your credit cards. Financing a large purchase, such as a new car, can hurt your debt-to-income ratio, which can make it more difficult to be approved for a home loan. Hard pulls of your credit when financing a large purchase can also make your credit score go down. It is in your best interest to keep your spending to a minimum and avoid financing anything in the months before applying for a home loan.
For more information, contact your local home loan company.Share