Buying a new home can be a stressful process. Many future homeowners are confused by the process of applying for a loan for home buying, but taking the time to learn about mortgages and being prepared before starting the process can take away that stress and confusion. These tips for how to get a house loan will help clear up some of the mystery and prepare you for what’s ahead.
1. Check Your Credit Report
Checking your credit report is fast, free, and easy. Visit Free Credit Report
to sign up and view your report. The report will show your credit score, along with your credit history to get a deeper look at factors influencing your score, including payment history, types of credit you’ve applied for, and the length of your credit history. If your score is lower than you’d like, this insight can help you see where you need to make improvements to boost your score before applying for a home loan.
Generally, you’ll want to have a score over 680 for the best chance of being approved for a mortgage. With a higher score, you’ll be more likely to get better rates.
2. Improve Your Credit Score Before Applying
If your credit score isn’t at or above 680, you might want to take steps to improve your score before going through the application process. Improving your credit score to get pre-approval for a mortgage will take time, but can be accomplished with some hard work. There are a few steps you can take that to boost your score before applying.
3. Hold Off On Other Major Life Changes
- Reduce your debt by paying down credit cardsKeep your credit utilization below 30%
- Call your creditors and ask about increasing your credit limit
- Continue making all payments on time
While you’re in the process of making this major financial decision, put other major life decisions on hold. It’s important to stay at your current job while you’re going through the process of being approved for a mortgage. Your employment status and income are factors taken into consideration when determining your eligibility for a home loan. Changing that status and income during the process can derail your application and extend your timeline.
4. Know Your Options
There are many options when it comes to home loans. Knowing your options can help you choose a loan that best fits your needs and that you’ll be most likely to qualify for. These are just a few types of loans available to home buyers from Fremont Bank
5. Know the Difference Between Pre-Approval and Pre-Qualification
- Adjustable-Rate Mortgage - ideal for those who are planning to stay in the home for a limited amount of time. An adjustable-rate mortgage is a loan with a low rate for an initial period. Your interest rate and monthly principal and interest payments remain the same for the initial period and then adjusts annually thereafter
- Fixed-Rate Mortgage - designed for those planning to stay in the home for a longer period of time. This home loan’s rate never changes, so you can budget wisely. With a no closing cost fixed-rate mortgage, the terms are easy to understand and easy to work into your monthly budget.
- FHA Loan - Federal Housing Authority loans are popular with first time home buyers and have more flexible terms because they are insured by the FHA. With this type of loan, you’ll also have a choice of a fixed rate or adjustable rate.
Being pre-approved for a mortgage involves your lender taking a close look at your financial situation. During pre-approval, you’ll complete a mortgage application and your lender will verify your income, check your credit, and determine how much of a loan you’ll reasonably be able to afford.
This is different than being pre-qualified
which means that the lender believes you’ll meet the requirements of a mortgage. With pre-qualification, the lender won’t see your full credit report. Being pre-approved will give you a much better chance of being final approved for the mortgage.
Buying a house takes a lot of time, money, and patience. By following these tips and working closely with the experts at Fremont Bank, you can take some of the stress out of buying your new home and successfully become a homeowner.