Buying a home is an exciting time of life. If you are a first time homebuyer you might be confused as you go through the process of applying for a loan. The more prepared you are before you start the process, the better. Here are some things that you should be doing before you apply to improve your chances of becoming qualified for a home loan.
1. Don't Open Any New Credit Accounts
One very important thing is that you keep your credit score high. Each time you open a new line of credit it will hurt your score. This doesn't mean that you can't get it back up, but it will take time. This is why you should avoid opening any new lines of credit such as a car loan, a credit card, even a medical bill that is financed through the office right before you apply for a loan. The less debts you have against you the better.
Additionally, you should get out of debt as much as possible. The way they will calculate what you can afford for a home purchase is your debt to income ratio. This means that the outstanding debts you have, like a credit card, car payments and student loans, will all count against you. This will lower how much you can afford in a house payment.
2. Build A Good Savings Account
Everyone knows it is important to have a down payment on the house. This will increase your chances to get approved for a loan without having to pay mortgage insurance. However, another important factor is having a good savings account. When you apply for the loan they will ask to see your bank account statements. They will see the money going in and out each month, how much you are saving and if you have an emergency fund. If a mortgage lender sees that you have a good savings that can help pay your mortgage in the case that you hit hard times, they will be more favorable to you.
3. Take Advantage of First Time Home-Buyers Programs
Some lenders have specific programs for first time homebuyers. They might require less down, give you a better interest rate, or have extra incentives to purchase. You should never keep it a secret that this is your first home. Let each lender that you talk to know your situation, and see what kind of perks they can give you.
By understanding these 3 things you can increase your chances of qualifying for a home loan. Contact a mortgage company, like Premium Mortgage Corp, for more information.