Becoming a homebuyer is an exciting step in your future. The upcoming months will be spent picking out paint colors and installing appliances in your home. However, before you can close on a property, you need to secure a home loan. It’s a good idea to find a lender who can walk you through the application process and help you save money. Follow these tips to work with a lender that offers a low interest rate and reasonable monthly payment.
Know how much house you can afford.
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As you start talking with lenders, you might be surprised at how much they are willing to give you. If you have good credit and stable finances, they might pre-qualify you for loans that are much more than you expect. At first, this might seem exciting. A higher loan amount means you can afford a bigger house or can move to a nicer neighborhood. However, that doesn’t mean you should overlook the limit of your means.
Your monthly payment isn’t your only mortgage loan expense. You will also have to cover property taxes, home insurance, utilities, and maintenance costs. The bigger your house, the higher these other costs might be.
There are multiple affordability tools that you can look into online. Use these to learn where you should set your home buying budget.
Look into different loan types.
If you are a first-time homebuyer, you may qualify for an FHA loan, which is issued by the Federal Housing Administration. These loans are made for people who don’t have a large down payment but still want to grow their wealth by buying a home.
Ask your lender if they are involved with the FHA loan process so you can take advantage of these favorable mortgage rates. The loan amount might be higher as a first-time homebuyer, but you can use this house as a jumping-off point for future real estate investments.
Even if you don’t qualify as a first-time buyer, your lender may be able to recommend other loan options that help you save money. There are loans for veterans, rural buyers , and people who want to rebuild the house they buy. You can check the usda map to know which rural areas are qualified for the loan.
Prepare your documents ahead of time.
Every lender will ask for the same information during the application process. They will need to check your credit score, will request employment paperwork, and will require proof of any assets you have, especially if you will use them as a down payment. If you want to streamline the application process, pull these documents together before you speak with a mortgage lender.
Even the most prepared borrowers have to gather additional documents during the application process. Try to respond quickly to your mortgage broker when they ask for personal information and other documents related to your finances. The longer it takes to get the documents through the underwriting process, the longer it will take for your loan to get approved.
Research different loan terms.
You may be tempted to reach out to work with your existing bank to apply for a home loan. While this lender is a good place to start, you might be able to find better rates elsewhere. Comparison shopping can help you find the best deal with the most favorable terms. Even if the lower interest rate is only a few points below the standard lender, you could save significantly in the long run.
Look into a home loan comparison tool where you can input your loan criteria and find lenders who want to help you.
Finding a lender isn’t the most exciting part of being a homebuyer. However, it’s important to work with someone who can secure a favorable mortgage rate and guide you through the application process. Take the first step to find a lender you like so you can work with them through the life of your loan.