Borrowers who are looking for a mortgage for the first time or interested in refinancing should be aware of the challenges they will face. Even though mortgage rates are competitive, many lenders are not as willing to loan out money.
After the housing burst of 2008, lenders are more cautious when they are considering are granting loans. They would prefer to handle the few good loans they have rather than risk losing money on high risk borrowers.
Borrowers should not be discouraged by this revelation. They can still qualify for a good interest rate on their mortgage, but they will be required to put in some extra work. The following tips should help you improve your chances of approval.
Know Your FICO Score
A FICO score is determined by your credit history. To find out what your FICO score is, you will have to purchase it. However, you can obtain your credit report for free. By law, you are entitled to a free copy of your report from each credit agency once a year. Get your report and the report of anyone else who may be applying for the loan with you and check the reports for errors.
Over 70% of consumers’ credit reports have inaccurate or missing information.
Know Your Financial Limits
Be honest about the current state of your finances and determine if you are able to afford a mortgage. You will need to take into consideration the total mortgage payment and any relevant charges in addition to your current financial obligations.
You will need to calculate your living expenses for three months and then calculate your income for the same amount of time. Subtract your expenses from your income, and then subtract your current rental amount from that total. The amount that you are left with is the bare minimum that you will be able to spend each month.
Have Your Paperwork Ready
Gather all of the documents that you will need to bring with you when you meet with the lender. Tax returns, assets paperwork, paperwork from outstanding loans and other financial documentation will be required by the lender. When you have this paperwork in place before you meet with a lender, the less anxiety and stress you will feel when it is requested.
Comparison Shop
Your main objective is to prequalify for a mortgage so when you meet with a seller you can bring your bargaining chips to the table. This is why it is important to find the lender who will offer you the best rates on a mortgage.
When mortgage rates are at a low point you should apply for a mortgage if you are looking to buy a home for the first time or refinance your existing mortgage. The best way to take advantage of these rates is to stay informed of market changes.