Are you about to purchase your first home? If so, congratulations are in order. As a property represents an important investment, it is wise to follow some simple guidelines in order to avoid any needless hassles along the way.
1. Check Your Credit
It is important to possess sufficient credit if you expect to be approved for a home loan. This is why you should obtain an online credit score. These services are generally free and they will take only minutes to complete.
2. Analyze Your Assets and Liabilities
From a financial point of view, an asset is an item (such as an investment portfolio) that provides a future economic benefit while a liability (such as an existing loan) is associated with a future obligation. Identifying both of these variables will provide you with an idea of how much flexibility you have in terms of securing a mortgage. If you already possess a significant number of liabilities, it will be more difficult to be approved for a loan.
3. Organize All Documents
It is always a good idea to have all required documents ready in advance. This will help to expedite process while providing the necessary information to the lender in question. While the paperwork can sometimes vary, some common documents to obtain include:
- Pay stubs
- Past tax returns
- Recent bank statements
- Your previous credit history (including rental information)
- An approved form of identification
It is wise to make digital copies of each for the sake of redundancy. These can also be quickly sent to the mortgage lender if requested.
4. Qualification
The application process can be somewhat complicated and not all lenders are created equally. Before you begin the actual application process, speak with multiple different lenders. See what they have to offer in regards to the maximum amount that can be borrowed and determine the associated interest rates. Keep in mind that you will normally be able to discover your qualifications online with no additional commitment. So, you can obtain a good idea of what is in store once you choose one mortgage over another.
5. Determine the Required Down Payment
Most experts recommend that your down payment should equate to 20 percent of the total value of the mortgage. However, this might not always be the case. Using a mortgage calculator from Habito.com will provide you with a free and user-friendly means to determine the appropriate amount before you commit to a specific lending scenario.
Purchasing a home is one of the most important milestones of your life. By simplifying the process and by understanding what is involved, much of the confusion and frustration can be eliminated. A home is a very real form of investment, so a bit of preparation can go a long way. Be sure to keep up to date with The Unfinished Man for even more useful lifestyle advice and real-world suggestions.
