by Courtney Soinski
Have you checked your credit and decided that it’s time to buy your first home? Well, it’s no surprise that making a home purchase can be an overwhelming process. Fortunately, there are ways to stay ahead of the game while keeping your stress under control. Before you jump into a new mortgage, let’s learn some preparation techniques to achieve the best possible outcome.
1. Check your credit report.
As soon as you apply for a mortgage loan, this is the first thing that lenders will look for. It’s always a good idea to check and monitor your credit score, and keep an eye out for any factors that may be harming your scores. Make sure that your credit report is as accurate as possible, and that no one else is getting access to your credit. Remember, the ultimate goal is to prove your creditworthiness to the lender in order to get the best rates.
2. Correct any inaccurate information in your report.
If you see any inaccurate information on your credit report or if you notice any accounts that you didn't open or addresses that aren’t yours, dispute it with the credit bureaus. Three of the major credit bureaus are Equifax, Experian, and TransUnion.
3. Research, research, and research!
Buying a home is one of the largest financial decisions you will make, so it’s important that you gather all information and research multiple loans, rates and brokers before making your final decision. If you get to work now and start researching all the options out there, you may even end up with better terms and a better rate.
4. The down payment: bigger is better.
Before you even decide how much to put down on your first house, be sure you’re also being realistic about what you can honestly afford. When setting your budget, keep one crucial thing in mind: the larger the down payment, the better your terms will be. Besides, wouldn’t it be nice to pay less every month that you spend in your new home?
5. Watch out for pre-payment penalties.
Depending on the type of mortgage you get, there may also be pre-payment penalties. Find out whether or not you’ll get penalized for paying your mortgage loan off early before making any sort of commitment.
6. Applying for multiple loans over a long period of time can hurt your credit score.
Every single time you apply for a loan, lenders make an inquiry that will be visible on your credit report. By dragging out loan applications over a month or longer, you can actually end up doing damage to your score, which in turn, can affect the type of rate you get on the mortgage. However, if you apply for a few loans over a series of 2 weeks, that only counts as one inquiry on your report, not multiple.
Making a huge purchase like your very first home can be very stressful, so every bit of information helps. Refer to this checklist as you prepare to apply for a mortgage loan. Knowing how to prepare makes all the difference in the world when it comes to getting the best rate.