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Steps to Take When Applying for a Mortgage Loan
In addition to other upfront costs that come with buying a home, some prospective buyers may not see the importance of having their soon-to-be home inspected. Understanding what a home inspection can reveal may help you understand why having this done is actually an investment, and Investopedia offers advice on what to expect.
When it comes to buying a home, getting approved for a mortgage may be more difficult than finding your ideal property. Despite stricter lending requirements and standards, the following steps can help ensure you get a better mortgage at an optimal rate.
In the months leading up to your home search, you should obtain a copy of your credit report to review your history, while your score will also greatly influence the rate offered by lenders. This will allow you to take care of any discrepancies when applying for a mortgage loan. Prospective buyers are urged to report any errors to the credit bureau to clear up the issue ahead of time. This also provides ample time to make some positive changes to improve both your credit report and your score.
Before setting out to visit prospective lenders, make sure you have all the documents that will be needed to determine your eligibility. This includes your last two pay stubs, recent W-2s and bank statements, as well as income tax returns. Not having this information can delay the application process, and could make you appear less serious about purchasing a property.
While you likely have a price point in mind, confirming how much you can spend on this investment is important before beginning your home search. Viewing homes that are outside of your price range could result in being unsatisfied with more realistic options, so make sure you also inform your real estate agent about your limitations and budget. When creating a price range, it is crucial to include other housing expenses that come with being a homeowner, such as insurance and maintenance.
You should also shop around with multiple lenders, collecting offers or getting prequalified. When comparing rates among lenders, make sure you are also looking at terms and conditions, as better terms can sometimes outweigh a low rate.
When trying to save money over time, you may want to consider applying for a shorter-term loan. Selecting a fixed-rate mortgage will allow you to create a set budget for monthly expenses, as adjustable-rate mortgage rates fluctuate and are dependent on the current market.
After applying, you may find that you have been rejected by a lender, but if this happens, you shouldn't lose faith in becoming a homeowner. Instead, you should ask the lender why your application was denied, and if it has something to do with your finances, you can strive to make improvements and try again in the near future. Sometimes, it may just be that lender, so don't hesitate to apply to another.