It can be really exciting to find yourself ready to buy a home, but it can also lead to a lot of frustration if you are not prepared for the process in advance. There are many steps that need to be taken to ensure that your property investment process is smooth and stress-free, and you will want to be aware of how the process works before you jump in with both feet. Being prepared can make all the difference in your home-buying journey.
Most people don’t even start thinking about the loan process until they have found a home that they are in love with. This might work out fine, but often there are steps that need to be taken before shopping for houses. There are some really important steps that need to be taken before you apply for a home loan, and making sure to take them can make all the difference in your ability to secure a good loan.
If you are ready to learn more about the tips that you should follow for the best home loan experience, you need to read on!
Tips for best home loan experience
1. Verify your credit score
If you are ready to take the leap and apply for a home loan, you will need to verify what your credit score is. Challenged or damaged credit can make it impossible to get a home loan. Banks are looking for people with a credit score of 700 or above when they review home loan applications. You will struggle to get a home loan with a score any lower than 650, and you might not get approved without a co-borrower on the loan.
Making sure that your credit is in good order can make all the difference in your ability to secure a home loan. This is a simple process as well since you can order a free credit report once a year to verify your score and check on any issues with missed payments. Taking care of your credit before you apply for a loan is a really important step in the process of being ready for the home loan process.
2. Save up
You will need to have cash in hand for your down payment, and you might also need to have some cash in your bank account for surprise costs that can crop up during the financing process. You will need to consider that the average down payment can be around 15-20% for a home loan. You might not be sure of the exact dollar amount that you will need if you have not started home shopping, but you can do some research in your area.
Home prices in the areas that you are shopping for can give you a guideline for your calculations. You will know a ballpark of how much you will need to save up for your down payment once you do this research. This will make the loan application process much easier, and you will be much more likely to get a home loan than if you do not have any cash saved up at all. Most banks will not consider a loan applicant who does not have a significant amount of cash in their bank account at the time of the approval process.
If you’re refinancing, then additional cash won’t be needed as the bank will count your existing equity in the home as the downpayment.
3. Get pre-approved
One of the best ways to improve your home buying and home loan application experience is to get pre-approved. When you work with a bank before you start shopping, you will know what kind of loan you qualify for and what kind of down payment you will need. You will also know if there are going to be issues related to your credit or other impediments that might stop you from getting a loan at all.
Getting pre-approved will also make it easier for your realtor to help you look at homes that are in your price range. This can be a huge factor in saving time on loan applications that are doomed to failure. The other benefit is that a large portion of the personal loan process will be taken care of when you go through the preapproval process. This saves you time later when you are ready to buy.
4. Prepare your documents
You can make it easier to apply for home loans by having all the right documents on hand. This will allow you to send all of your information to the lender right away when you start the home loan process. You will almost always be asked for pay stubs or for two years of taxes if you own your own business. The best mortgage books will explain what financial statement analysis information a bank may need to approve your loan. This information is used to verify your income.
You might also be asked to provide proof that you have paid off high-dollar items that you might have had loans for. Sometimes there is a lag in reporting to the credit bureaus when a loan is closed, and having too much debt to income can lead to your loan being denied. If you have other documents that you have been asked to provide for other loans in the past, you should include these as well. The more prepared you are, the faster the loan process will be.
5. Securing a home loan can be easy
When you plan ahead, getting a home loan can be a piece of cake. There are many people who start shopping for homes before preparing, and this can lead to disappointment when you cannot get the loan that you need. You will be much more likely to look for houses that you can afford if you use these tips, and your home buying experience will be much easier and less stressful.
When you prepare in advance, the home buying process can be simple, straightforward, and painless. This is the goal of every borrower who is looking to get a home loan, but it is not always the reality of the experience. Using these tips will help you to get the right home loan for your needs quickly and easily.