Finding the best home loan may sound like a simple job, but it shouldn’t be taken lightly. With the mortgage rates on the rise, potential home buyers have to realize that they need to act soon or find themselves at risk of paying more each month. While securing a mortgage is relatively easy, it may be challenging for some home buyers, especially for those who are not prepared.
While you cannot simply change your credit history and your income, there are several important things you need to take into consideration to help improve your odds of successfully getting a mortgage.
● Know What You Need
Most lenders will require a standard package of materials from people applying for a mortgage. Most mortgage requirements include:
➔ Recent monthly pay stubs
➔ Recent two years’ worth of tax filings
➔ At least three months of bank account statement
● Determine How Much You Can Spend
Most lenders use the 28/30 rule. This means that the monthly mortgage payment must not exceed 28 percent of your gross income and your total revolving debt payments (potential mortgage, car loans, and other monthly installments you have) must account for no more than 36 percent of your gross income.
● Avoid Interest-Only Loans
Most financial experts recommend avoiding interest-only loans unless you are planning to move in for a short period of time or if the loan is a “short-term bridge” or construction loan. Paying for the interest alone does not help build ownership or equity in your home.
● Avoid Online Transaction
The Internet is not a place for mortgage transaction. While there are reliable websites that will help you find better rates or give you access to a mortgage calculator for Guelph properties, for example, to calculate your potential loan. Online sources are also a great place to find other crucial information; however, you should avoid mortgage companies that process transaction solely via the Internet.
● Understand the Market You are Buying In
The type of home you are looking to buy and the market you are buying in can play significant factors on your mortgage. For example; the lender will have stricter requirements and standards if you are applying for a mortgage in a province or state where a lot of condominium projects have gone bankrupt. The lender will examine your finances, the building, and will require at least a 25 percent down payment.
● Improve Your Credit Score
One of the key factors to help you get approved for a loan is a good credit score. It also determines the rate you will pay for the mortgage. You can get your credit score information from three major credit bureaus. Once you get your credit score, there are a number of ways to improve it:
➔ Make sure that the information is accurate and dispute problems if you find any
➔ Pay off the balance
➔ Avoid late payments
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