Buying a home is wonderful, and one of the best accomplishments in life. No doubt, it takes lots of discipline to get all the things you need to buy a home and to be prepared to be scrutinised in the home purchasing process. The entire procedure forces you to reach a level of seriousness that matches the obligation you are taking on. If you can do this and put things in order, you can make it through the maze of concerns.
One of the biggest issues with purchasing a home is the mortgage, which is the loan you take out to finance your home purchase. More than 95% of people who buy homes get a mortgage, so chances are you will seek one too. If this is your first time seeking a mortgage, you probably have lots of questions and a bit of nervousness about getting it done properly. Well, it can get complicated, and this is why we have put together some tips for you to help you navigate the process. So follow these tips and things should get easier.
You should clean up your credit report before you go to get a mortgage
Finance companies will use your credit report as a key element for deciding which loans are available to you and the interest rate you get charged. The higher your credit score and the better your credit report looks, the more options for good loans you will receive. So first pull your credit report and check for any outstanding delinquent bills. Pay these off immediately. Also, make sure that everything is accurate because there are often mistakes on a credit report.
If there are mistakes which might include credit card accounts you no longer have open, credit write-offs or bankruptcies that did not occur, or account you have open that are not listed, you should write to the credit bureau and have these things corrected before you go to the financing company. You should also look to get your credit card usage down to under 50% for each card. If you are over 50% on any card, pay it off immediately and wait until it clears before you go to a finance company.
Finally, finance companies also look at how much of your income is already tied up with existing bills. This is called the debt to income ratio. If you are spending over 43% of your income on your bills before the mortgage, most finance companies will not lend. Do the calculation, and if you are above 43% you need to pay down some of your debts before you seek a mortgage.
Not all banks and finance companies work the same
Remember that when you seek a mortgage for your new home, banks and banking institutions operate differently. Some financing companies will require more information from you and others will only fund buyers who meet strict requirements. Others will take a hands-off approach to help you get through their options, and others will work closely with you to help you understand the full mortgage process.
Because the process is so complicated and you are likely looking for a lender because you want to move quickly, we suggest you go with a lender who has a variety of options for you, and who holds your hand you through the process. They should make everything very clear and never push you to a decision if you are not comfortable. If there are issues to be worked out, they should do this with you in a way that builds rather than erodes your confidence. And finally they should welcome all of your questions and provide clear answers. Take your time and work with reputable companies when seeking a home loan.