While interest rates remain low, qualifying for a mortgage may be more challenging, especially for first-time buyers. Fortunately, the following seven tips will give you an advantage when you are ready to begin home shopping.
1. Stay on Top of Your Credit Report
One of the major factors in obtaining a loan is your credit history and score. An excellent credit score is above 680 and helps you qualify for a better interest rate and loan options. Stay on top of your credit report yearly and check for errors and correct them before you apply for a loan.
2. Debt-to-Income Ratio Improvements
Lenders look at your debt-to-income ratio which is the amount of money that you make versus the amount you owe. It is a good idea to pay off those large credit card bills and try to increase your income.
3. Substantial Down Payment
Making a substantial down payment on your loan in the beginning will save you money in the end. Typical loans require anywhere between 5 and 20 percent. Some loans require a 20 percent down payment; otherwise lenders may require you to pay for mortgage insurance that protects the lender from any risks should you not be able to make your mortgage payments.
4. Choose Between a Hybrid or Fixed
Before you secure a loan, determine how long you think you will stay. If you plan on being in a home a short time, a hybrid loan earns you a lower interest rate for a fixed period. However, if you have long-term plans to stay within your home and community, a typical 15 or 30-year fixed rate is probably best.
5. Shop Around
Don’t be afraid to shop around for your mortgage. Compare rates and negotiate the best home loan deal. Upon receiving comparable rates, call and meet with different lenders and use your intuition to decide what makes you most comfortable.
6. Submit Accurate and Thorough Loan Documentation
Submit the necessary documentation so that your mortgage loan is processed timely and accurately. Gather documents such as real estate contracts, tax returns, bank statements and pay stubs.
7. Lock or Float
When you’ve thoroughly investigated your lenders, mortgage programs and rates, you’re ready to lock in a rate. However, before you do, determine if it suits you best to float your interest rate which means the rate moves with the market or lock it in immediately. Choosing to float your loan runs greater risks but sometimes with gains.
The home buying process doesn’t have to be scary, contact Acuity National Real Estate Solutions, LLC today at (502) 238-7500. We provide our clients the best of both worlds—old-fashioned professional excellence supplemented by the cutting edge technology necessary for an optimized process and smooth, speedy transactions. In today’s market, you need an agile title and closing partner that can still keep its feet on the ground.