Ready, Set, Go – Everything You Need to Do for A Home Loan
Are you ready to buy a home? It is not just a matter of making the decision to go out and buy that white picket fenced house. You need to get your finances and home loans in order first.
Getting one of those home loans without proper financial planning is like shooting an arrow off into the night. You get whatever loan offer comes your way, which means you could be spending more on that mortgage than what you would like.
What to Do Before Getting a Loan
The key to finding one of the good home loans is to do some financial planning before you go and apply for a financial loan. Being able to manage your expenses better can help you achieve your dream of buying a home. Here are a few tips that can help you plan your finances to better qualify for home loans.
Reduce your Debt
When you are thinking of applying for a loan, banks and lenders will look at your debt to income ratio. If your monthly debt is high, then they don’t consider you a good loan candidate because your capacity to pay your monthly mortgage is low.
In most mortgages, you can only borrow 80% of the value of the property. The down payment is about 20%, and you need to find a way to come up with this money without going into debt. Most financial experts say you should have 40% of the home’s value as a down payment so that the loan does not end up being a large burden. Put aside a certain amount of money in a recurring deposit.
Be On Your Best Credit Behavior
Pay down on your credit card debt. This is one of the best indicators for financial institutions. It shows how responsible you are with your debt. Accounts in collections or missed payments are going to make them wary of giving you a loan.
Keep A Good Credit Score
Anything above 700 is a good score. This is because lenders often take credit scores into account before they give out a home loan.
Of course, you can still get a loan with good credit but the rates will be higher than expected. A good credit score gives you a lower bank home loan, so pay off your debt for at least six months before you take out a loan.
Savings for Future Expenses
Create a savings account with at least three months of your salary. This reserve can help pay for extra costs or unforeseen problems.
Lenders want to know you have job stability and a regular monthly income. Be sure to keep your job for at least a year or more before you apply for a mortgage. Changing jobs or heading out into the freelance world will hot help you when you are getting a mortgage loan.
Be Careful After Getting The Loan
Buying a home can be an exciting time. But homes are empty when they are sold. You need to furnish the house, but this is where you need to be careful. Don’t overspend on furnishings as it can become a major expense. Set a budget and adhere to it to prevent future problems of being unable to pay the mortgage.