If youâ€™re someone who has been living on rent, you must be thinking of buying your own house to eliminate the stress of paying a lump sum amount as your house rent, even after meeting all the other debt obligations. Most people who think of buying a house hesitate to take the final step due to huge financing that is needed to buy you a house. While there are many kinds of mortgage loans in the market, the point that worries the prospective homebuyers is whether or not they can make payments towards the loan on time. Although the current mortgage rates throughout the nation are at its record low levels, there are some other ways in which you can grab an even lower rate on your home mortgage loan. Are you aware of the points that you should keep in mind when you want to take out a home loan? If answered no, read on the concerns of this article.
1. Did you check your credit score before applying?
The first question that you should ask yourself before approaching the lender is â€œWhat is my credit score?â€ Is it good enough or does it needs to be repaired? No mortgage lender will give you a mortgage loan with a poor credit score. In fact nowadays, no mortgage lender will entertain a borrower who doesnâ€™t have a credit score of about 680-720. So, even if your credit score is somewhere around 650, you need to take rigorous credit repair steps through which you can boost your score and seem to be creditworthy to the mortgage lender. Do this before approaching your lender.
2. Did you assemble all the required documents together?
Are you aware of the fact that s light delay in providing all the required documents to the mortgage lender might delay the entire process of taking out the mortgage loan? If you didnâ€™t, you should immediately gather all your income proofs, income tax returns, W2s and the pay stubs so that you can immediately offer them to the mortgage lender without delaying the entire process.
3. Did you save enough money to pay down the exact amount?
You must be aware of the fact that you need to pay down at least 20% of the loan amount while taking out the home mortgage loan. If you donâ€™t pay down this amount, you have to pay the PMIs or the Private Mortgage Insurance payments that will augment your monthly mortgage installments. If you want to avoid paying such payments, you should save enough money so as to pay down the exact 20% of the loan.
4. Did you pay off debts to lower the DTI ratio?
Apart from your credit score, youâ€™re supposed to show your DTI ratio which is the ratio between what you earn and the total amount of debt that you carry. If you have a high DTI ratio, this will mean that you canâ€™t make the monthly mortgage payments on time after meeting all the other debt obligations. Therefore it is a necessity that you should always pay down your debt and lower the DTI ratio to make the lender feel that you can make the monthly mortgage payments even after meeting all the other debt obligations.
Therefore, when youâ€™re about to take out mortgage loans, you should take into account all the above mentioned options. Make sure you manage your personal finances properly so that you donâ€™t miss payments on the mortgage loan as defaults will always mean losing your home to a forced foreclosure.