Is it time for you to consider applying for a mortgage loan to purchase your first home, are you actively looking for a new home then read the following tips and they will help make this a much easier process.
Having a good credit profile will make it easier to qualify for a home mortgage, so if you have established a good credit history then you may be ready to go. By establishing a good credit profile you have demonstrated that you are a responsible borrower and have the ability to repay your loans. Start out small by making sure you pay your smaller loans like your credit cards and car loans on time each month and pay a little more than the minimum amount due. Americans today seem to be in a rush to start to build their credit history, many of us start around the age of 18 with our first pre-approved credit card application.
Once you have built a solid credit profile you can show the home mortgage lender that you are a good candidate for a home loan. It will also show that you are serious about your personal finances and that you are a low risk loan applicant. This will enhance your chances to qualify for your first home mortgage and make it easier to get the amount you need for your dream home.
The advantages of a good credit score will show when you are approved for the home mortgage loan, and possibly also qualify for a lower interest rate on the loan. Many times the interest rate will be less than what is offered to loan applicants that may be considered as high risk borrowers.
Now if you are one of the many of us that do not have the strong credit history you do not need to feel left out of the game. If your credit profile is less than stellar here are a few things that you can do to offset the lower credit score and still get the home mortgage loan you need.
Save Your Money For A Good Down Payment
Having a decent down payment on the home you would like to purchase will allow you to apply for a smaller home loan, the lender will not ignore an extra 10% to 15% put down on the home you want. This shows you are not going to be a high risk borrower and that you can manage your money.
Most lenders try and get you to put a least a 20% down payment on the property, and then usually approve the home mortgage loan for the remaining 80% of the cost of the home. This helps in lowering the lenders risk, by making the loan a lower percentage of the total value of the residence then the lender can choose to sell the home should you default on the mortgage.
So if you can save 25% to 30% to put towards your down payment on the property you will help to lower the risk that is shouldered by the lender and improve your chances to qualify for the home loan.
You May End Up With A Higher Interest Rate
If a bad credit history is making it difficult to obtain a low interest home loan then you may have to agree to a home mortgage with a higher interest rate, the lack of a sizeable down payment and poor credit score will sometimes cause this. If you are saddled with a higher interest rate the lender is trying to make sure that they are compensated for the increased risk level that is taken by approving your mortgage.
Although this is not the most beneficial of financial situations to be in, getting approved for a home loan with a higher interest rate is not cause to turn down the loan. If you are approved for a home mortgage loan be sure to make your payments on time each month and you will actually begin to improve your credit history. Whenever possible pay a little more than the amount due, and eventually you will have the opportunity to refinance your home and possibly get a lower interest rate.
Posts
0 Comments