5 Tips to Help You Apply for a Mortgage
Everyone dreams of settling into their own home at some point. Having a place to call your own that you can decorate according to your tastes is the ultimate picture of financial stability for many, making it one of the most desirable milestones to achieve. Unless you have vast resources at your disposal, however, you’ll have to apply for a mortgage to fund your dream home and move closer to making your fantasy a reality.
Getting a mortgage is a crucial step to buying your first home. However, if you aren’t careful, it can be a complicated process. You may end up applying numerous times until you finally find a lender willing to work with you. To avoid this, here are five tips to follow that will help you prepare for a mortgage:
Review Your Credit Report (1+2)
The very first place lenders will check when assessing your mortgage application is your credit report. For this reason, you’ll want to give it a good comb-over to check if anything is amiss. Get a copy of your credit report and ensure that it is as accurate as possible. If something is wrong, dispute it right away so that your credit history reflects your actual payments.
However, if you find that your debt-to-credit ratio is a bit too high, you’ll want to continue monitoring your score to see how it may change. If you notice accounts you didn’t open or any addresses that don’t belong to you, be sure to act right away, as this may be a case of identity fraud.
Put in the Work
There’s always room for improvement in your credit score, and putting in the work—however tedious it may seem—will always pay off. Buying a home also means making a financial commitment for at least 15 years and potentially 30, so it’s vital to grab the best deal possible. Conduct exhaustive research on loans, rates, and brokers before signing your name on a contract, as it will help you find the loan with the most favorable rates and terms.
Create a Budget and Stick to It
It’s important to dream and take all the steps to realize it, but you’ll need to stay grounded about what you can realistically afford. Many loans with low-interest rates require a 20 percent down payment. If you have only a fraction of this, you may want to adjust your timeline or expectations. You may be able to find a deal that requires a much lower down payment, but it may come with a higher interest rate that will make you pay even more over the long run.
Understand What Lenders Look For
Another tip that would help you score the best deal possible is understanding what lenders look for and prioritize in an application. Lenders base most of their decision about your loan amount on your credit score, which will serve as the foundation of how much confidence they have in your capacity to repay them on time. The higher your credit score, the lower the interest rates, and the easier it will be to get your desired down payment amount.
Decide on the Type of Mortgage You Want
There are different mortgages available, so you’ll need to determine the best type for your financial situation. You’ll get to choose between a 15-year mortgage or a 30-year one at a fixed or adjustable rate. If you want more security and predictability, a fixed-rate mortgage would be ideal. However, if you want more flexibility and a chance to make lower payments, adjustable-rate mortgages would work best.
Conclusion
Applying for a mortgage can be an intimidating process when you aren’t sure of where to start. By following these tips, you’ll be prepared to meet with several lenders, work on getting a higher credit score, and negotiate your way to the most favorable terms around!
Nextafi is a mortgage broker that can help you buy your next home with confidence with our lower mortgage rates and an easy, simple loan experience. We’ll guide you in each step of the application process, ensuring you have all the help you need to secure the best deal possible.