Eclectic Homes

How to Secure a Mortgage

Although purchasing a home can seem like an overwhelming task, there are practical actions you can take to enhance your chances of securing mortgage financing. When applying for a home mortgage loan, a lender will verify all information it receives from you as the borrower. Your target is to show the lender you will have the ability to repay the amount of the loan that you borrow.

Evaluate your current and expected future income and expenses. Contain homeowner insurance, property taxes, utilities and home repairs and maintenance together with the total cost of the monthly loan payment in your own calculations. Decide if you’re able to afford to buy a home, and then determine how much of a mortgage payment you can handle.

Understand what your credit score is. Consumers may access their FICO scores online for a simple fee (see Resources). You’ll require a minimum FICO score of 730 in order to be eligible for the lowest rates of interest. If your credit score isn’t as large as you’d like it to be, then a continuous income and available cash reserves can help increase your chances of qualifying for a home mortgage. Showing a timely payment history will also assist. Work on improving your credit score, as raising it by 100 points may save you paying thousands of dollars more in interest payments over the life span of the loan.

Order a copy of your credit report from each of the three major credit-reporting bureaus (see Resources). Consumers are entitled to one free credit report every year from TransUnion, Equifax and Experian. Check each of the reports for errors. Ask –in writing–that the credit agency fix any mistakes. The National Foundation for Credit Counseling warns that errors on your credit report may be the main reason for a creditor denying you a home mortgage. The NFCC advises consumers to check their credit reports at least once each year.

Save cash for a downpayment. In the current consumer market, borrowers generally need at least 20 to 25 percent for a downpayment in order to get better interest prices. The more cash you put down, the less risk you’re to the creditor.

Shop for the best loan deal. Compare lenders and get details associated with interest charges, points, application fees, appraisal fees and the terms of different loan programs. Find out if there are prepayment penalties. The Federal Reserve Board advocates asking lenders whether the interest rates being quoted are the lowest for the week or two that day. Ask a creditor quote points to you in dollar amounts so that you know how much you will be paying.

Apply for a loan. Be prepared for the lender to conduct a credit check. Included in the application process you will be required to provide information relating to duration of employment, income, assets, liabilities, investmentsand other loans and mortgages, and current household expenses. You’ll also need to provide the lender with all the address and description of the property, and present a copy of the sales contract.

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