This is an incredible moment - you've found your dream home. Now you need to get a loan to pay for it. It takes some effort, but if you follow the steps below you can find the home loan that suits you, with a minimum of fuss. It may even be useful to take the first steps before you go shopping for a home.
First, order your credit report from three major credit reporting agencies in the United States - TransUnion, Equifax and Experian. This is a very important part of your search for a mortgage, because this is something that your lender will also want to consider calculating your ability to repay your mortgage. The credit report gives them an idea of how you are punctual when it comes to paying your bills, and also how much you've borrowed and still owe. A good credit record gives confidence that the lender is taking a risk on you back. They feel reassured that you will pay them back, and certainly make them more comfortable with you a loan at home.
It is worth to get your credit report before applying for a loan, so that you can check for errors or obsolete entries. This is very important because these errors, it can be almost impossible for you to get a home loan. But once you know they are there, you can follow them and remove them, which will improve your chances greatly with lenders. It may even mean that you can get a better interest rate.
Second, take a look at the interest rates for home loans and what is the general trend of these rates was. Mortgage rates fluctuate, and having an idea of what are the main economic indicators can help you decide whether to apply for a home loan now or maybe wait a bit. It will also help you decide if you want an adjustable rate mortgage (variable), or if you might be better to fix the rate immediately.
Third, you need to start deciding what type of home loan will be the best for you. Most people will be looking for a loan pretty standard, so I'll focus on them. Before you start looking, you need to know the answers to these questions:
- How much money do I need as a deposit?
- How can I pay for a home loan payment each month?
- How long do I plan to stay in the house?
- Is it important for me to repay the loan early?
- Will I be able to occasionally make additional payments off the principal?
- What is the stability of my long-term income?
- This is my income likely to increase over time?
All these questions are important because they help you understand what you are looking for. There is no need to look at loans that require a deposit of 20%, for example, if you only have 10%. Buying a home is a major investment, and you need to ensure you get the best deal possible on your loan. By not looking at these loans are really all the elements of your situation, you have a much better chance of finding the right loan.
Now that you know exactly what you need for your loan, you can start checking all the different lenders have to offer. Most will have a loan that meets your criteria, then you can compare interest rates, fees and other different loans. It will take some time, and it is often something that a mortgage broker can be much faster and with less hassle than doing it yourself.
It is very easy to become confused when comparing loans. It seems that every lender uses different names for things that are essentially the same. So do your best to compare apples with apples. It is also possible that the lender may offer special rates or waive certain fees to seduce you in the door, but over the life of the loan you actually end up paying more. Take your time and ask as many questions as you want.
Once you've narrowed a little, look at some of the other elements of the package home loan. In addition to the interest rates and fees, you must consider other factors such as the frequency of payments, prepayment penalties, requirements for mortgage insurance payment penalties on the loan before a certain period of time has passed, and so on. These kinds of features are not always addressed in the basic information on mortgages, so you may need to dig a little deeper and ask questions at this stage.
Finally, once you have chosen the lender for your loan, make sure you take a look at exactly what documents are required for your loan application. These typically include fully completed loan application and credit report fees. Normally, you pay for the application report, appraisal or credit when you apply, so be sure to set aside money to pay them.
The good news is that most home loan applications are assessed relatively quickly these days, so hopefully you will not have to wait too long to be told whether or not you are ready to buy your dream home.