Like many things, applying for a home loan can be done well or badly, and it can make the difference between getting approved quickly or getting rejected entirely. Of course, you want to do it well so you can get your dream home without any hassle! And with these seven tips on how to apply for an award winning home loan, you’ll have everything you need to get started. Let’s begin!
1. Know What You Can Afford
To qualify for a home loan, you will need to know the size of your mortgage. There are two ways that you can figure out how much house you can afford. The first is by taking 25% of your gross income and subtracting this from 100%. The other way is by using 28% of your gross income and subtracting this from 115%.
2. Get Pre-Approved
Getting pre-approved is the first step in securing a home loan. This will help you save time and money when it comes time to make your final purchase decision. So, while you are still trying to decide which lender is best for you, get started by applying for pre-approval today. Remember that you can apply for home loan online.
3. Have a Good Credit Score
A good credit score is one of the most crucial factors in your application. It’s the first thing lenders look at when processing your loan application. To guarantee a strong credit score, be sure to pay all bills on time, carry a low balance on any credit card accounts, and don’t close any accounts that are in good standing. If you do have a few blemishes on your credit history, don’t worry!
4. Show That You’re a Low-Risk Borrower
An award-winning home loan application is your gateway to a dream home. But, you must be a low-risk borrower because the bank wants to know that they will get their money back. To help make sure that you’re a low risk borrower, try these tips:
- Stay current on your bills – this includes your house payment and any other debt you may have.
- Save money for the down payment – since lenders want to see at least 20% of the sale price in cash or liquid assets, save up 3-6 months’ worth of living expenses for the down payment.
5. Choose the Right Lender
Find a lender who will give you a fair and competitive loan. Use this list of questions as your guide for finding the right lender:
- What kind of financing do they offer?
- How long have they been in business?
- Is the lender accredited by Better Business Bureau, or other accreditation services such as CFPB, BBB, and NMLS?
- Does the lender have strong customer reviews online?
- How do their rates compare with other lenders?
- Do they use a broker network to offer you loans from many different lenders so that you can make a more informed decision about which one is best for you?
6. Compare Mortgage Offers
Comparing mortgage offers is important because different lenders have different requirements, benefits, and rates. It’s a good idea to gather as much information as possible before you apply for any type of home loan. Here are some questions that should help you make your decision:
- What kind of credit score do I need?
- What’s the down payment required?
- Is there a penalty if I want to refinance or sell my home?
- What type of monthly payments will I receive?
7. Get Mortgage Insurance
A new home loan is a big investment and securing the right mortgage insurance will help protect it. There are two types of mortgage insurance: private and government-backed. Private Mortgage Insurance, or PMI, protects you from defaulting on your loan.
This type of insurance typically costs about $25 per month for every $100,000 borrowed. If you have a down payment of 20% or more, you can get rid of this monthly cost entirely by paying for Private Mortgage Insurance upfront.
As you can see, many things can be done to guarantee a successful to apply for an award winning home loan. However, it’s important not to forget the most important thing: getting your credit score up. Remember: it doesn’t matter how good your credit score is if you don’t have any other qualifying factors for the home loan. If you’re stuck on what to do next, just contact your mortgage professional and ask for their advice!