Before Applying for A Home Loan

Before Applying for A Home Loan
May 17, 2020 Prosperity Connection

1. Check your credit report. I recommend to all clients that they check their credit report at least twice a year to make sure things are reported correctly. Even small errors can prevent you from getting approved for a loan or cost you in the form of higher interest rates. When it comes to purchasing a home, you want to make sure there are no errors prior to applying with a mortgage provider.

2. Make sure you keep and maintain a budget. Lenders want to know that borrowers have a handle on their personal finances. By creating a monthly budget and sticking to it, borrowers can show that they have the ability to adequately manage their cash flow and repay the loan as expected.

3. Pay down your credit cards. Potential borrowers who have credit cards that are maxed out or over-the-credit will create unnecessary red flags for mortgage lenders. You never want to give mortgage lenders the impression you are over-extended with credit cards. Keep credit card balances at 30% or less of total available limits. For example, if you have a $1,000 credit card limit, don’t carry a monthly balance of more than $300 if possible. By keeping balances as low to $0 as possible, you will not only improve your image with lenders, but you may also dramatically increase your credit score.

4. Open up a savings account. Saving is very important overall, but when you’re a homeowner, you never know when something will need to be fixed or replaced. By having a savings account, you can ensure that unexpected emergencies don’t become an unexpected financial nightmare!

5. Shop around for the best interest rates. A mortgage loan is a big deal! You as the consumer, want to get the best rate you possibly can. It is important to remember that you can apply with multiple mortgage loan providers within a 14 day period and it will be counted as one hard hit on your credit score. Make sure you find the best deal for you by shopping around!

Evette Baker, Director of Financial Capability