If this is the first time you are applying for a home loan, it’s a good idea to familiarize yourself with the home loan application process, so you don’t face any unnecessary hassles along the way. With that in mind, we’ve listed out a few tips to help you secure a home loan with the best rate.
Dispute Errors on Your Credit Report
Any errors in your credit report could be bringing down your credit score. Given the impact your credit score can have on the interest rate you get offered, make sure to dispute any errors that you may come across in your reports.
Try to Bring Down Your Debt-To-Income Ratio
The higher your debt-to-income ratio, the less likely it is that you will be able to honor all your payments on time, and lenders will take this into consideration. So, make sure to calculate your debt-to-income ratio and check if you can bring it down by paying off some of your high-interest debts.
Apply for Pre-Approval
You’ll improve your chances of getting a home loan if you apply for pre-approval first. The lender will check your credit score and financial situation, based on which you will be pre-approved to borrow a certain amount of money.
Avoid Making Large Purchases While Looking for A Home Loan
Making any large purchases, especially on your credit card, could increase your debt-to-income ratio and your credit utilization score. Both these factors could cause the lender to reject your application, even if you already have been pre-approved.
Gather Your Documents
During the application process, your lender will require you to submit a number of documents like your pay stubs, W-2 forms, and taxes for the last two years at least.
Save up For the Down Payment
Most conventional home loans will require you to make a 20% down payment, at the very least. So, it’s best that you start saving up for your down payment well before you even start looking at homes.
It’s best to check how much you can afford to borrow and look at houses within this budget. Don’t make an offer for a house that is over your budget, hoping the bank will approve your loan application.