In recent years it has become challenging to get a home loan or mortgage loan and it does not seem that this will be changing anytime soon. Lending standards have been tight since 2012; a mortgage with an attractive rate can still be snagged. If you are a savvy borrower, you can improve your chances of success by understanding the rules and being prepared. You can stay on the top of the game while trying to secure a mortgage in present times by keeping the following tips in mind.
Prepare before you begin When applying for a mortgage loan, certain basic documents are requested by every lender. Documents, such as bank statements, income-tax returns, two pay stubs and W-2s should be with you when you walk into a lender's office. These documents and any additional ones requested by the lender should be saved in an electronic format, so they can be conveniently resent if anything gets lost.
Figure out the loan amount you can afford
Figure out how much mortgage you are eligible for on your own, instead of relying on your lender and borrow maximum amount. A budget should be planned, and room should be left for unexpected expenses. The home loan amount that can be afforded can be determined and the monthly mortgage payments can be estimated through bankrate’s calculators.
Comparing interest rates is not enough when shopping around for a mortgage loan. The importance of rates cannot be ignored, but closing costs, different types of loans and points must be considered too. Before making a decision, estimates from at least three banks and three mortgage brokers should be acquired.
Be wary of time
Remember, the clock will begin ticking from the moment the mortgage application has been submitted to the lender. Any documents requested by the lender should be quickly sent during the approval process. For buyers, if the closing of the home loan is delayed, the purchase could get killed and their deposits will be lost. When refinancing, the interest rate originally locked in can be lost due to a delay. An unexpected closing date should be requested, and periodic contain should be maintained with the lender until the loan closes. Some lenders have more rapid pace when it comes to closing.
Maintain a pristine credit until closing
Never assume that you have won the battle just because your lender said that you have been approved after pulling your credit. Usually, your credit will be pulled again by the lender before the loan is closed. Therefore, avoid moves due to which your credit may get affected should be avoided. Applying for new credit cards or lines should be avoided too. Also avoid, closing any accounts, financing a new car, and pay your bills on time until your mortgage loan closes.
In case of need, consider a low doc loan
It is possible that a mortgage loan lender may reject you because you are self-employed and cannot provide evidence of your income in the form of tax returns. In such a case, applying for a residential low doc loan or low documentation loan is a feasible option. Some form of supporting evidence of the income still has to be provided, usually in the form of BAS statements. However, at times bank statements or an accountant's declaration is also accepted by some lenders. After all, it is good to know about this option which is not so demanding regarding documentation, since with a low doc loan, you can avail a fixed or variable rate mortgage even if you are the owner of your own business or you are a sole trader. True, it is still challenging to secure a mortgage loan in present times. However, if you keep tips such as the above in mind when you start applying for a home loan, you will surely succeed with getting the loan closed.
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