Take These Four Steps For An Easier Mortgage Process
Buying a house is a huge financial decision. One step most homebuyers are worried about is applying for a mortgage. Without having the appropriate financial backing, you won’t be able to afford a house.
You first need to understand the home buying process to know at which step the mortgage factors in. A lender will explain to you your options, allowing you to decide based on your finances. From the assessment stage to closing, your real estate agent will be by your side every step of the way.
However, there are some things you need to take care of on your own. Let’s look at the tips on how you can simplify the mortgage process:
Tip #1: Fix Your Credit Score
First, let’s talk about your credit score. It happens to be the top deciding factor when the lender is considering a loan application. Know this — the lower your credit score, the higher the interest rate will be.
As a result, the monthly payments might be more than you can afford. If you default on a payment and don’t make it in the grace period, the lender will put your house in foreclosure to recoup his money. This is why lenders advise homeowners to fix their credit scores and make a 20% down payment to lower their credit scores.
Tip #2: Get Pre-Approved
You have found your dream house and are ready to make an offer. However, the seller does not even entertain you. Why?
It’s because you don’t have a pre-approval letter from a lender, which shows that you are a serious buyer. The lender assesses your financial documents to find out if you can afford a mortgage.
Based on your credit score and history, income, and credit utilization ratio, a loan amount is set along with the interest rate. The lender mentions the obligations you will take on with the loan. Remember, a pre-approval letter simply clarifies your affordability position to the seller.
It doesn’t mean the house is yours. If the house is valued at a higher price than what is mentioned in the pre-approval letter, you will have to pay the difference yourself.
Tip #3: Pay Your Bills On Time
With your mortgage application finally approved, it is important to ensure that you are making all the payments on time. This means paying the bills and not making unnecessary expensive purchases. If your credit score falls in the process, you risk the opportunity of negotiating with the lender for a reduction in the interest rate.
Tip #4: Consider A Remote Closing
A remote closing allows you to sign all the documents in the comfort of your home. Ask the lender if they can mail you the notary documents. That way, you will get the keys to your new house without going back and forth with the seller or real estate agent.
Always consult a real estate agent before buying a house. You will have a better chance of getting your offer approved by a professional than making one yourself.
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