There are very few people that can purchase a house outright. Most people that will try to purchase a home today will have to get a loan. These loan options are called mortgages, and they come in a variety of lending amounts, interest rates, and more. You cannot get a home without getting one of these unless you legitimately have the purchasing price in cash or credit. Chances are, you don’t have six figures to purchase a new home, so you’ll need to work with a mortgage lender to get your home loan. Before you apply for one of these, however, you should do a few things, because if you don’t, the process can become difficult to manage.
Get Your Records Straight
The first thing that you should start doing is getting your records straightened out. By this, it’s meant that you should get all of your tax information for the past few years, no less than 3 years, pay stubs, and any documents that show your income, debt, and more. The bank that you’re going to work with is going to want to look to see if you’re ready to take on a large loan of this type. While there’s some leniency to this, your credit score, liquid assets, and more go into denoting whether you are going to be approved for a loan of varying amounts. Often, you’ll be asked to pre-qualify, so that you can look at the various houses that are within your “price range”.
Improve Your Credit Score
You should know what your credit score is before applying. If you have credit that is under 600, you will most likely have to fight to get a mortgage, and could be subject to a lot more expenses including insurance, and other elements that you would otherwise not have to pay for. It’s a good idea to know your credit score anyways, but you should know whether or not you need improvement, or you need to correct errors. Improving your score is critical to your financial success, and of course, getting a mortgage.
Pay Off Consumer Debt
One of the best things that you can do before you start looking for a mortgage is to pay off your consumer debt. This means anything that you have borrowed, from credit cards, a car loan, or any outstanding debt that you may have. While student loans may be hard to get a wrangle on, you should at least keep those current. All other forms of debt should be secured and dropped down if not completely paid off. The less debt you have, the higher the chances are that you’ll get a good rate and quality mortgage solution.
Don’t Buy Anything Big
The next thing that you should remember when you’re trying to secure a home loan is to avoid buying anything too large. Basically, don’t buy anything large on credit, including a new vehicle. Try to avoid making any sort of financial moves that could disqualify you from getting a loan, or more. This includes financing furniture, cars, and anything that you may want to buy on credit, just avoid it.