How to Apply for a Home Loan
Applying for a Home Loan is something which most people will face at some time in their lives. The ease of getting approval for a home loan seems to go in peaks and troughs doesn’t it, depending on the economic situation of the world, whether house prices are rising, stable or dropping, whether the employment market is “steady” (whatever that means) and more of that sort of thing, but regardless of whether you want to buy your own home during a recession or a time of great economic boom, there are a few things which you need to consider so that you don’t fall at the first hurdle:
Credit Report – everybody has one, and your credit report is a vitally important factor when you are applying for a home loan. You need to get hold of a copy of your credit report and check through it carefully – one estimate reckons that around 1/3 of them are wrong, so if your credit report has some mistakes then you need to know about them and get them sorted out. Errors can either raise the mortgage rates which you are offered or stop you from being successful at all.
Outstanding Credit – it’s not good if you already owe loads of cash from last years Christmas spending spree or your once in a lifetime holiday, so if you do have credit card debts it’s a really good idea to clear them before you apply for a home loan, if at all possible.
Credit Card Accounts – you really shouldn’t apply for any new credit card accounts just before applying for a home loan – it tends to look a little bit suspicious, so even if you have a perfectly valid reason it’s best to find an alternative if you can.
Down Payment – this is just so important, I can’t stress what a difference it can make when you apply for a home loan. The more money you have for a down payment, the lower the loan you will need and the more likely it is that your home loan application will be approved. If you haven’t already started saving, you’d better start now!
Okay, maybe not all lenders need a large down payment, but my argument still stands that the bigger down payment you have the better deal you’re gonna’ get.
Other funds – apart from needing money for the down payment, there are also loads of other things which need paying when you buy your first home, keep hold of all available money until everything is sorted out and don’t be tempted to buy a new sofa just yet, not until you know that you’ll have somewhere to sit on it.
Income – you’ll need to provide proof of your income, so your lenders will either need details of your employment, or if you’re self employed you’ll have to give details of your accountant etc. If you’re looking for a change of jobs it’s probably better to wait until after you’ve got your home loan – get my drift?
Price Range – any mortgage lender is very unlikely to approve you for a mortgage which you can’t afford, so if you know your debt-to-income ratio before you apply for a home loan then you should have an idea of whether it is within your price range or not. Don’t try to bite off more than you can chew, if the interest rates rise in the near future and you’re already at full stretch, there’s only one way to go . . .
Be Honest – don’t try to pull the wool over the lender’s eyes. You must be totally honest in your dealings, otherwise the worst case scenario is you being charged with fraud – yes, it’s that serious. Don’t be tempted to tell any little porkies just to try and swing the balance, otherwise you’ll not only land yourself in trouble with your lender but nobody else will probably ever touch you again.
Buying your own home can be one of the most exciting and rewarding times of your life, but just remember that if you don’t keep up the payments you can end up losing everything. It’s a serious business and one which needs to be handled properly.
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