Check Your Credit Score
You can get an attractive deal on your home loan if your credit score is good. Therefore, before you start the home buying process, it’s a good idea to get a copy of your credit report to find out what your credit profile looks like to potential lenders. If required, you can take measures to improve your score.
Don’t Spoil Your Credit During the Loan Processing
Before closing the loan, lenders tend to check the borrower’s credit report a second time to find out if there’s been any change. This makes it important for you to skip doing anything that may hurt your credit score while the loan is being processed. Until your home loan closes, pay all your bills on time, don’t take out any new car loans, and don’t apply for any new credit cards.
Start Saving for A Down Payment
Based on the lender and the type of loan you plan to choose, your down payment can range from 2.25% to 20% of the home’s purchase price. Create a monthly budget to help you save enough for your down payment.
Once you figure out how much you can save, consider having that amount deposited automatically from your paycheck or bank account to a savings account. This will make it easier for you to put aside money for your down payment.
Learn How To Compare Offers
Even if two loans have the same interest rate, there would be differences in the fees and points, making one loan more expensive than the other. Understanding all the components that comprise a mortgage is important to find out the price of your mortgage, so you can accurately compare the offers made.
Get Your Financial Documents Together
When you apply for a mortgage, your lender will ask you to submit several financial documents. Getting these documents in order beforehand can fasten the processing of your loan application. At a minimum, the documents you should gather are your most recent W-2, last two years’ tax returns, previous two pay stubs, and current brokerage and bank statements.
Use a Mortgage Calculator
Mortgage calculators can help you understand how big of a loan you can afford. They are simple and show you how much your monthly mortgage payments would be, based on different interest rates, home prices, and down payment rates.