Buying a house is always a big deal and you really need to know how the mortgage process goes. Today we will be giving you some home loans tips, how to apply for a mortgage, and some other things you need to know before taking a loan.
Some Simple Terms You Need To Kow about Mortage
You really need to understand these three things before you start your Mortage loan process.
Interest Rate: The first thing your lender will ask you when you about applying for a loan is your credit score to know the amount of risk you can take. If you have a bad credit score you already know not all lenders accept that and those that accept the interest rate will be high.
Down Payment: A downpayment is a particular amount you pay towards the purchase of the home. Mostly you need to pay at least 10% for the downpayment toward purchasing the property.
Loan To Value Ratio: This is the number one ratio lenders look into to approve your loan. There is just the percentage of the value of the home that will be on loan excluding some other additional costs like insurance, taxes, and others. The acceptable percentage for your mortgage loan to be approved must be at least 78%
Home Loan Application Process
There are certain processes to follow before taking a home loan.
These are the 6 steps you need to follow in order to apply for home loans
We will be including some home loans tips for you in this process so you to get your mortgage approved
1. Finacial Paper work
This is of cuss very important because if you have adequate paperwork needed for your mortgage application then you will have no issues during the process
You need these 5 things:
- Your legal full name( Make sure you add any extra names you have )
- You will need to include at least two years of your address history. They will also confirm it with your credit report
- Your income and employment information is needed: Provide your company name address phone number because your lender will need to confirm all this
- Dependent: These vary from loan types you are getting but here sometimes require ages and numbers of the family.
- Total Asset: They will need to collect two months of bank statements and retirement. Money if 401(k) or retirement money will help here too.
2. You need to know the basic Mortage loan requirements
Now we are talking about the 3Cs here Capacity, Collateral, and credit reputation.
If you are just trying to apply for a home loan then you need to know these three things though you might find them in other terms like debt-to-income (DTI) ratio, credit score, and assets.
DTI Ratio: This is simply your total debts by your pretax and getting below 43% is good because this will determine if you can repay back
Credit Score: Anything about loans maybe it is a personal loan, auto loan, mortgage loan, or any loan you really need to get your credit score good before you start to apply so as to know the right lender to apply from. Yes, you can get a home loan with a 500 credit score but with a higher interest and a 10% downpayment but you cannot compare it with those that have a 740 or higher because you will enjoy lesser interest and get approved faster. If you want to balance your credit score you need to start paying your bills on time and keeping your credit balance below 30%. We also explain a lot about that in a section of our previous articles on How Can I Get A Loans With A 500 Credit Score (Here Is How)
Asset Verification: These is very important and lenders look into your assets from three angles.
- Your closing cost and downpayment: Of cause, the more you put down the lower your repayment
- Cash Reserve: This is the amount of money you have down. The tip here I that you have at least 3 to 4 months amount of your mortgage repayment in the bank will strengthen your approval
- Your cash inflow verification: Yes, everybody can just collect large money from a friend and put it in the account just for verification. Lenders verify how money gets into your account. If it is a sudden large money inflow to your account it might delay your loan or let it get rejected or a red flag if there is no paper trail of the money.
Loan To Value (LTV) Ratio: These will surely affect how much you can borrow, your repayment, and even your interest rate.
3. Choosing The Right Mortgage Type
There are always different mortgage loan programs lenders can offer you. They all depend on the requirements that satisfied the documents you provided during the review…
4. Home Loans Tips To Consider Before Getting a Home Loan
Yes you might be given gup to 43% of your income as a loan by lenders but you also need to consider your personal expenses, lifestyle, and how to leave bothered free life.
Remember when you acquire these properties you will need to maintain also then you need to have a maintenance budget script out.
Then your expenses like Health care expenses Education goals , Childcare costs , Savings goals, Groceries and Utilities
5. Now you Ned to choose the right mortgage loan lender
There are a lot of lenders out there and it’s very easy to make comparisons, ask for their contact and make your findings before you take the home loan.
6. Fill Your Mortage Application
Now its the time to fill out your form since you already have your fact and your already know what to do and what not to do.
It is very important you make copies of all your application and also document any conversation maybe through online application , through vcall, or face to face.
Conclusion: Home Loans Tips
These are the few tips and processes you need to follow before taking a home loan. It is advisable to make sure did not skip steps because taking a mortgage is a very big financial step you are taking it requires you take your time.