How to Prepare for the Home Loan Process
If you are preparing to
buy your first home, the mortgage loan process can seem like an endless paper chase. Even those who are going through the loans process for the third or fourth time find that the home loan process is a hurry-up-and-wait proposition where lenders dictate the pace. Lenders are, by nature, a conservative bunch and like their world to turn in greased grooves with a logical progression of steps that applicants must endure to get financing. However difficult it may seem while you’re going through it, there’s a method to the madness of the mortgage loan process that ensures that the person(s) applying for the loan are serious about their responsibilities. Here are some ways that you can prepare for the loans process ahead of time so that it proceeds as easily as possible:
Save for a down payment
One sure way to speed up the loans process is to have saved a sizable down payment. Nothing speeds a lender’s pen faster than a borrower who can put at least 20 percent down right away. Some lenders won’t even begin the mortgage loan process unless a buyer has 20 percent of the purchase price.
Obtain copies of your credit report
Get a copy of your credit report from each of the three main credit-reporting agencies, Equifax, Experian, and TransUnion. Lenders will use these reports to determine your creditworthiness and carefully examine how you have managed credit in the past.
Correct any errors in the reports
The first thing a lender will look for on a credit report is your credit score, sometimes called a FICO (Fair Isaac Corporation) score. Carefully go over each of the credit reports and if they contain any errors that made your score drop; make sure to correct them with each of the agencies using their recommended procedures. Correcting any mistakes on your credit report could save you tens of thousands of dollars through lower interest rates.
Shop around for the best rates
A good interest rate can save borrowers many thousands of dollars over the term of a home loan. So don’t be afraid to shop for interest rates the same way you would shop for a car or another major purchase. If you have a good credit rating, lenders will be more than happy to negotiate.
Have a stable work history and steady source of income
As mentioned previously, lenders are a conservative bunch. They prefer that borrowers have a steady work history and source of income to ensure that the loan will be paid in a timely manner.
After preparing for the home loan process by meeting most or all of the steps outlined above, apply for loan pre-approval. This will tell you how much you can comfortably afford to borrow for a home, give you piece of mind, and allow you to move quickly when you find the home that is right for you. The best way to ensure that everything proceeds as smoothly as possible is to follow these and any other recommendations that a lender has made to expedite the loan process.