Nearly half of home buyers admit that they are not confident or knowledgeable about the mortgage lending process. Don’t let that statistic apply to you—plan ahead and you will be confident as you navigate the application process.
If you expect to walk into a mortgage lender’s office and say, “This is my first home; I don’t have experience with the buying process,” you can also expect to pay more. Plan ahead by researching the housing market. Make sure you understand terminology like “adjustable-rate mortgage,” and “pre-qualification.” Work with a lender to learn more about the process, and don’t feel obligated to sign the loan just because they spend time explaining things to you.
If you don’t trust the lenders in your area, consider talking to a financial adviser. Some advisement firms, like the Fort McMurray mortgage broker Performance Mortgage & Financial Services Ltd, offer free financial advice to their customers. Others can match you up with a trusted mortgage lender or help you increase your credit ratings.
Research different lenders in your area as well. A house is a huge investment, and you should take all the time you need to evaluate your options and find a lender that fits your needs.
Know Your Credit Score
The earlier you check your credit score and credit report, the more time you will have to correct mistakes or review disputes before a mortgage lender runs a credit check. If you are unhappy with your credit score, do whatever is necessary to increase it. The higher your credit score is, the more likely you will be to qualify for a loan with low interest rates. Plan ahead for a mortgage by building up your credit. A financial adviser can provide ideas for increasing your score.
There are two different preemptory steps that help you plan ahead for a mortgage loan: pre-qualification and pre-approval.
Pre-qualification is when a lender gives you a ballpark figure of a loan they can give you based on your self-proclaimed credit status, income, existing debts, and assets. It gives you an idea of what you can afford, but since it’s an unofficial step, sellers don’t take pre-qualification as seriously as pre-approval.
Pre-approval does not mean you are guaranteed financing for a mortgage. However, not getting pre-approved may keep you from even being considered. With this step, the lender actually verifies your information to give you a loan estimate. If you are pre-approved, it lowers your risk in the eyes of the seller and shows them you can afford to buy the home.
Create a Budget
Instead of finding a home and making your budget work around it, establish a clear budget and look for a home that matches it.
Don’t forget the hidden costs in your budget. Buying a house isn’t like going to the store and buying a basketball—there are more fees than the initial cost of the house. You also need to pay closing fees, insurance, taxes, and so on. When something in your house breaks down, you can’t just call the landlord to take care of it—you’ll have to hire the repairman and cover the cost of the repair yourself.
Not only should you create a budget for the home-buying process, but have one that includes all of your expenses as well. That way you can get a realistic idea of the monthly mortgage payment you can afford. Plan ahead by knowing exactly what a home will cost you and how it will factor into your regular expenses.
Take time to research the mortgage process, improve your credit, get pre-approved, and create a budget before you apply for a mortgage. When you do these few things before you start applying, you will be more likely to get the mortgage you want with the interest rates you hope for.