Getting a home loan? Here are some tips that’ll make the process easier
Photo by Phil Hearing on Unsplash
If you’re planning on purchasing a home in the future, one of your first steps will be to get a home loan. This will be an important step, and you’ll need to equip yourself with the knowledge you need before taking it. Here are some tips to help make this process easier.
Getting pre-approved
A pre-approval can help you narrow down what type of home you can afford, and may also give you an idea of how much you’d pay for it each month. When you know exactly what your budget is, you can have a better idea about where in your area to look for homes.
Often, you’ll need documented proof of your finances to facilitate the process. Thus, you may need a pay stub because pay stubs are usually asked for by lenders. Your pay stub is a pay statement that states how much you have earned in salary over the past time period. Since being able to pay back your loan requires having a stable income, pay stubs can provide some peace of mind when applying for a mortgage.
Choosing a bank or financial institution
There are many different banks and lenders offering various types of mortgages and financing options; it can be overwhelming knowing where to start looking.
One mistake people commonly make is getting pre-approved by too many institutions – even if they don’t have specific homes in mind or aren’t actively shopping around yet.
When you’re pre-approved, a bank will review your financial information and determine how much they are willing to lend you. This is not the same as being approved for a home loan; it simply means that if you were to go out and purchase a home right now, the bank would agree to let you borrow up to this amount.
Since pre-approvals only last for 60 days, don’t spread yourself too thin by submitting your information to every lender in town. You should also be sure that before applying with any lender, you understand the terms of the offer and have an idea of what type of financing options best suit your situation – whether it’s conventional financing or some other alternative lending option.
Working with a good real estate agent
When you’re shopping for homes, you should be working with a good real estate agent. When you work with an agent who knows the area well, they can give you insight into what types of financing options are available – such as whether there is any government assistance or other alternatives to traditional bank financing in your area.
They can also help ensure that you aren’t overpaying for your home, and will investigate any suspicious offers that come your way (such as ones that seem too good to be true).
Getting an early start
When you’re looking to purchase a home, the earlier you start shopping around for financing options, the better. Lenders and institutions may have certain requirements that need to be met or special incentives that are only available during specific time frames – so don’t leave things until the last minute.
If you already know which neighborhood you want to live in, this can also help when shopping for a mortgage because lenders will factor in your proximity to work and public transportation. Being able to walk or bike rather than having to drive is always desirable from a lender’s perspective since it saves them money if they know they won’t have as high of a loan payment due to fewer miles driven.
Getting a good deal
When shopping around for home loans, you may be tempted to simply go with the bank that offers you the lowest interest rate. However, this isn’t always the best move when applying for a mortgage – especially if you plan to stay in your home long-term.
The lower your interest rate, the higher your monthly payment will be; and many people who purchase homes tend to stay in them for 5 years or more. Even if you do eventually sell your house for more than what it’s worth now (or break-even), increasing your monthly costs with a low-interest rate still means that by the time you sell you could have amassed several years of high-interest payments that can really add up.
Home loans with bad credit
Photo by Travel-Cents on Unsplash
Even if your credit isn’t perfect, there are still some financing options out there for you. When people apply for mortgages with bad credit, they often opt for bad credit home loans that don’t require good credit ratings – such as an FHA loan (Federal Housing Administration).
Another option is applying for a second mortgage through a private lender; although loans typically come with higher interest rates that are paid back over a shorter period of time (in order to pay them off quickly).
In conclusion, to make the home loan process easier to get proof of income documents like pay stubs, a real estate agent should be worked with closely, an early start is needed to find good deals on mortgages and bad credit doesn’t close any doors when shopping for home loans.
