5 Things You Need to Know When Applying For a Mortgage Loan

In 2004, 69 percent of Americans owned a house. Today that number is down to 63.4 percent. With changes in the economy, there are have been some rough patches for homeowners or prospective homeowners.

But brighter days are ahead and more money is becoming available for home loans. In 2011, the amount of home equity available was $6.3 trillion. Today that number has climbed to more than $13 trillion.

Securing a home loan can be daunting to some people. Home loans work a little differently than loans for things like apartments or cars and it’s important to know the difference. If you’re thinking about or are starting the process of applying for a home loan, here are some steps you can take:

  • Know Your Credit Score: With the convenience of online banking, it takes just a few minutes to pull up your credit score. This is very important if you’re wanting to get a home loan. Knowing your score can save you from surprises. The last thing you want to find out is that your score is lower than you thought or there’s something in your credit history you forgot about. Having a low score or poor history can bring your plans for a home loan to a halt real quick.
  • Save Money: Most home loans require some sort of down payment, so not having cash on hand is another potential road block. Most lenders set their own requirements for a down payment, but keep in mind that the bigger the down payment you make, the more it’s going to help you in the long run. Keep in mind that home loans and mortgages offer require other expenses like closing costs and home appraisals.
  • Keep Working: Remaining employed during the loan process is critical. Quitting or job or getting fired from your job cuts you off from a much-need money source and employment changes can put yet another snag in the application process. A loan application is often approved based on whatever information you present at the time. Changes in employment will probably cause lenders to review your finances.
  • <Manage Debt: Having credit card debt won’t stop you from getting a home loan, but the less you have, the better your chances are. Lenders look at how much debt you have and too much could be a hindrance. Paying off credit card debt could help your chances of securing a home loan. On the flip side, don’t drive up your credit card debt during the application process or once you’ve been approved.
  • Budget: When it comes to home buying, it’s important to have a budget. Living in a large house is nice, but it won’t be that way for too long if you can’t afford it.

The bottom line comes down to this: if you’ve got too much credit card debt or some financial troubles, deal with them and use it to motivate yourself toward your goal of homeownership. Take time to find out and improve your credit score and when it comes time to apply for home loans, set a budget and stick to it.

Leave a reply