If you are like most homebuyers, you are going to need to take out a mortgage loan in order to purchase your home. If you have never had a mortgage loan before, you may feel a bit overwhelmed by the process of getting a loan. You may even be unsure of how to go about getting a mortgage loan or you may be confused about when you should start the process of applying for a loan. To that end, if you are getting a mortgage loan for the first time, here are a few tips that you should keep in mind.
Tip #1: Meet with a Mortgage Officer Before You Begin Your Home Search
In general, it is best to meet with a mortgage officer to discuss your loan options before you begin looking at your real estate options. In this way, you will have a better idea of how much you will be able to borrow, which will then help you determine how much you can spend on a home. Meeting with a loan officer and establishing a relationship with the lender will also help make the process of actually getting a loan much easier once you do find the right house.
Tip #2: Fix Your Credit
Another benefit to meeting with a mortgage loan officer is that she can help you determine whether or not you need to improve your credit rating in order to receive a better interest rate. You may find that you are only a few points away from qualifying for a better rate. In this case, it may be in your interest to work on improving your credit in order to save yourself thousands of dollars in the long run. Sometimes, even waiting just a few months as you continue to pay your bills in a timely fashion is all that is necessary to get your score just a little bit higher.
Tip #3: Pay Your Other Debts
If you already have loans, a credit card balance or other debts, it is in your best interest to pay them down as much as possible before you apply for a mortgage loan. The more debt that you have, the less money you will be able to borrow in order to purchase a home. If you have too much debt, the lender will not approve you for a mortgage loan at all. By comparing your debt to your income, the lender will derive a debt-to-income ratio. If your debt-to-income ratio will be more than 43 percent after you take out a mortgage loan, your application is not likely to be approved.
Tip #4: Gather Documents
When you apply for a mortgage loan, you will be asked to provide documentation to prove your income, your assets and work history. Documents you will likely be asked to present include tax returns, bank statements and brokerage statements. Start gathering these documents ahead of time so there will be no delay in processing your loan application.
Tip #5: Keep Spending Under Control
After you have applied for a mortgage loan, resist the urge to make purchases on your credit card or to take out other loans until you have closed on your home. Making these types of purchases will change your debt-to-income ratio and may impact your credit score, which could jeopardize your mortgage loan application.