Getting a home loan is no joke—and mortgage lenders never joke about it, either. It’s a serious matter. It’s important that you know the different advantages and disadvantages that you may encounter during the application process and after.
Here Are Some Things To Take Into Account To Ensure Your Residential Mortgage Process Runs Smoothly:
Good credit is essential
This is probably one of the most important things to have in mind when applying for a mortgage. Banks put a lot of money on the line for these transactions so they are very cautious about who they lend their money to, so recently their standards have increased dramatically.
In order to be considered for a residential mortgage, you must have an excellent credit score that can show you’re a responsible person. This shows that you are good for paying your mortgage on time and monthly.
If your credit score is lower than you’d like, there are things you can do to help boost your credit score. These are just a couple to get you started. (Read Creditrating.com’s article to get even more detail)
- Pay all your debts on time. Late payments negatively affect your credit score, so it’s important to make a full payment every month.
- Find out your credit score. You are able to request your credit report from the big three credit bureaus once per year. Take a look at the report and fix any errors that you see.
Have a settled lifestyle
Lenders are looking for borrowers who are financially stable. Constantly switching jobs will give an image of someone who can’t ensure a steady income and is, therefore, considered a risk and can cause your loan request to be denied. So make sure you’re settled in one job (not planning to quit or to switch jobs) and you’re not planning on moving soon, during the time of the application.
Living at the same residence for at least more than 3-4 years shows you’re
Even if you’re confident about getting your mortgage loan, it’s important to avoid spending great quantities of money, applying for new credit, or getting new credit cards while going through the procedure. These activities can be negative for your debt-to-income ratio and they can also affect your credit score.
Mortgage providers will inquire about these kinds of events making the process lengthier and, in some cases, your loan can be denied if they find something is not working for them.
Make sure you have no debts
Having outstanding debts will inevitably impact your chances of getting a loan. Before thinking about applying for a residential mortgage, you should pay off all—or almost all—large debts. Lenders will always consider how much debt you can handle, as a loan will essentially represent a monthly debt you have to pay. Therefore, clean your debts and close any credit you’re not using at the time to make your status cleaner and safe to handle a loan.
Find a loan that fits you
Before applying for a home loan, make sure to do the necessary research to understand well how they work and if they can fit your budget. Is your income enough for the current mortgage you have in mind? Learn if you can cope with the monthly rates, whether you choose a fixed-rate or a variable rate mortgage, the moment you decide you must know if you can afford all the current expenses while also meeting the monthly mortgage payment. Remember that it can take up to 30 years to finish up your mortgage payments which
Think about the time you will be living there
If your plan is to live in your new home for 5 years then you have to make sure the payment term of your mortgage loan fits the time of your stay. For example, a long-term fixed-rate loan has high-interest rates and they’re paid for periods of 10, 20, and 30 years. Therefore, you would be paying more interest while you could just get a short-term fixed-rate loan that can fit your time better and
Ultimately, the aim is to pay off all the loan before you reach the first rate adjustment, meaning you won’t have to deal with higher rates later on. Obtaining a residential mortgage can be a defining step in your life and you want to do this right. Always research everything you need to know before making this decision. Keep all your debts in check and prepare yourself financially when applying.
That New Home You Want Is Within Reach!