Mortgage loans can often be more hassle than they’re worth, but it’s an essential step to purchasing a home that you will hopefully be supporting your life or your family for a long time. You can consider it a necessary evil, but it shouldn’t have to feel that way. If you are at all concerned about whether or not you can get a home loan, don’t worry so much. Here is some advice on how you can help yourself in preparing for your loan:
- You will need good credit. This is possibly the most important thing to remember. Lenders will not have much of an incentive to loan to a person with half-decent or worse credit, since they don’t have any real indication to know if you are reliable and responsible with your money. It’s really important that you are paying your debt and credit card bills timely, as this will be a huge indicator on how it’s going to impact your credit score. Try not to allow anything to go to collection agencies, either.
- You will need some sort of organized stacks of paperwork detailing your finances. You have to prove where your money comes from to the lender anyway, and keeping your W-2s, tax forms and anything else related to your financial history should be kept for records. Lenders have reason to worry – many people end up in default in their payments, even when that isn’t their fault, and banks are foreclosing homes. Lenders need as much incentive as they can get to ensure themselves that they will be paid back.
- Look through all your alternative residential loan options. There are several of them, different for different people. For low-income families, for example, there are the FHA loans, from the Fair Housing Association. It helps low-income families or first-house buyers get qualified for their loans. There are also alternative mortgages, such as ARMs, which are determined based on how long you are keeping the house. This will impact your mortgage interest rates. Research as much as you can about these loan options before making a decision…
- ….But make sure the research is timely. You will have to make a decision soon enough, because mortgage rates will only continue to go higher. Don’t rush yourself, it’s never a good idea, but as soon as you feel comfortable about the numbers you are looking at, take a chance at that growing confidence and make a bid on a house.
- Speaking of bidding, use bargaining skills. The current mortgage market is leaned towards your side. When there aren’t as many buyers out there looking for a mortgage, the lenders are pressured to lower prices for the current market in order to get buyers. Use bargaining skills to get the best possible purchase price for your potential new home. Lenders and sellers need to make business somehow, and they have a lot to lose if they no one to buy!
- Budgeting is just as important as bargaining. You need to keep a realistic standpoint and realize what you are capable of based on your income. Ideally, you will want to spend no more than 43% of your monthly income on debt, mortgage and bills combined. If you can get yourself in that sense, you will be able to live comfortable. It may sound like a long shot at times, but it’s better for you. Even if this seems far-fetched, the important lesson to take here is that you will really have to watch your money and spending habits, and you will have to take a good look on how the mortgage is going to affect your finances.
- If you are a current homeowner, see if you can refinance in any way. It may not be likely because the rates have shot up last year, but for some, it may still be possible. If you are paying more than 5% interest on a monthly basis, then it’s probably time to try to get it refinanced. Despite that you may think it’s a futile chance, take it anyway. It doesn’t hurt anyone to ask, and you will never know what kind of answer you will get.
- You have rights! Buyers now are getting new privileges since the Consumer Financial Protection Bureau have changed some of their regulations. Check your rights based on your state.
- It’s very important to remember to try to stay calm and enjoy the process. It should be an exciting time for you, but even if you do have a lot to worry about, just remember to stay calm. You never know what kind of opportunities lie ahead anyway, and once some of them inevitably pop up for you, you will get yourself in a more confident position to start making important financial decisions.