When you’re trying to line up a home loan before making a purchase, it can feel like you’re at the mercy of the bank. But there are some things you can take care of beforehand to help you qualify for a higher amount and better interest rate. Whether it’s your first time getting a mortgage or you’d like a better result than you got last time around, getting your finances in order can save you time, money, and stress.
Check your credit report: Since your credit report and score are so important to what sort of mortgage you’ll qualify for, it’s important to keep an eye out for any mistakes and make sure they get fixed as soon as possible. Get the process started at least six months before you plan to apply for a loan. You should also make sure not to take steps that could lower your score during this time.
Pay down other debt: Debt-to-income ratio is another important consideration that gets used, so if you can, make bigger payments on credit cards and other loans. This will help reassure banks that you’re able to take on a new mortgage.
Save for a down payment: At the same time, it’s also a good idea to have a good-sized down payment ready even before you get qualified. This will help increase your total money available, and will also help you get a bigger loan, since you might need up to 10 to 20 per cent of the amount you’re qualified for (not to mention the same percentage of purchase price when you do find a house.)
Shop around: Since you’ll get different results from different lenders, don’t just stick to someone your agent has recommended. Find someone you trust and are comfortable working with, as well as someone you’ll be able to negotiate a good rate with. Get a wide range of initial quotes before you start narrowing your choices down.
Have your paperwork ready to submit: Before you and your lender go to fill out your application, you’ll want to have pay stubs, bank statements, tax returns, and all the other information you’ll need in order.
Lock in your interest rate: Once you’ve submitted your application, you can pick a variable rate in case interest rates go down by the time you close, but this can be a risk depending on where the market’s heading, so you’ll want to be careful. You may want to simply lock in a fixed rate and know what you’ll be paying the whole way through.
Making things easier for yourself down the road can be easier than you think, and will help lower the chance that you’ll get unpleasant surprises in the middle of the process.
If you need to find a local bank, be sure to ask an agent who they recommend when working in local areas. They will know the best financier for the properties they sell. Ask an agent here.