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How To Prepare For A Mortgage Loan

Mortgage Loan

After the crash of the house market in 2007, it was seen that most of the buyers were very careful with their lending standards. With the passage of time, it was seen that the banks had fewer requirements and started offering loans with as low as 3%.  If you are to prepare for a loan, you should do the following things to prepare:

Look For a Mortgage That Suits Your Finances

It is important that you look at the mortgage carefully before you apply for it. When you purchase the home, you automatically qualify for tax reductions and can build equity. If you get to unlock these benefits, it would help your finances, which is great. A lot of the fixed rate mortgages give you a higher starting rate and offers a sense of security that the rate of the interest will remain the same throughout the period of the loan. If you feel that you can’t find a loan that suits your situation, you can analyze the situation after a little gap.

Student Loans Are Not A Deal Breaker

According to the National Association of Realtors, almost 60% of the people who were buying their homes for the first time reported that they could not buy a house before because they had to pay their student loan. You should know that student loans are not deal breakers, provided you do everything responsibly.

Work On Reducing the DTI

You should work on reducing the DTI because that will show how the monthly income is an indicator of how you can take more debt. Having a low credit card balance will help your case.

Stop Borrowing

You should know that when you apply for a new credit loan, it affects your credit report that can lower your chances of getting a loan and can also impact the final interest rate. Make sure that you stop applying at least 12 months beforehand. Remember that if you will have too many credit inquiries, it will seem that you are desperate for credit, which is a red flag.

Do a Little Self Reflection

You need to think how reliable you are as a borrower because that will help you to be on your best behavior, which will help your case. Remember that the banks will have a look at your credit history, thus that needs to be presentable.

Learn About the Credit Situation

You should know that you will be carefully scrutinized by the lender, which is why it is a good idea to have a look at your report before they do.

Prepare Your Credit before Buying a Home

Here are the necessary steps that you should do to prepare your credit before purchasing a home:

  • Have a look at your credit report card way before you apply for the mortgage and remember that things like late payments can have a negative impact on your credit report card.
  • Make sure that your credit card does not have any inaccuracies. If you actually do have any discrepancies, you should file a dispute at the credit reporting agency.
  • Ideally, you should have at least three trade lines that have been active for the past two years at least. If you are applying for FHA, you should know that they require two trade lines only.
  • Another thing that you should know is that you should leave your older credit lines open so that they can help in boosting the overall credit score in the long run. Make sure that you use the credit cards frequently, just so the trade lines are active.
  • Do stop buying the credit before closing because that hurts the credit. If you are in escrow, and you have debt utilization ratio that is above 30%, your loan can be disqualified.
  • Be careful when shuffling your money around because when you apply for a mortgage, the bank views your checking and savings account. If you transfer money here and there, it will complicate the paper work process.

In conclusion, this is how you should be preparing for a loan. Good luck!

Cos Stratigos
Cos Stratigos
Cos Stratigos is the author of Mortgage Lending Place

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