4 Ways You Can Prepare Now to Qualify for a Home Loan in the Future
home loans
Preparations to apply for a home loan should begin well before you find a home you want to buy.
To get the lowest interest rate and best mortgage terms, work on the following now to get preapproved for your next home purchase and avoid potential pitfalls to your loan’s approval.
Update Your Credit Score
Get a free copy of your credit score by one of the main credit reporting agencies: Experian, Equifax, or TransUnion.
Visit the online websites to find out how to copy. Check your credit report every year to make sure the information is correct and up to date.
If you find a discrepancy, contact the creditor to address the problem.
A favorable credit score is one of the main things that lenders look at when deciding whether to approve your loan application.
Eliminate Consumer Debt
Pay down any credit card balances, especially those with the highest interest rates.
As soon as you pay off one balance, apply that payment to the next highest credit card balance until it is also paid in full.
Avoid using several credit cards. Stick to one or two with the lowest interest rate.
Long-term payment plans for a mobile phone or car tires, for example, should also be paid off as soon as you can manage it.
Some of these accounts have low interest that shifts to a higher interest rate after a certain period of time.
Reducing your consumer debt now will enable you to get the best rates and terms on home loans.
Pay Your Bills on Time
Another thing that lenders look at in your financial profile is whether you are keeping up with your monthly payments.
In addition to credit card debt, they want to know if you pay your utility bills and insurance premiums on time.
A clean credit history showing that you keep up with your financial commitments puts you in a better position to be approved for a home loan when you apply for one.
Avoid Costly New Purchases
While making timely monthly payments and paying off consumer debt balances, don’t make additional major purchases unless you pay for them in cash.
Taking on new, additional debt could undo some of the progress you are making in other areas of credit management.
Wait to buy something big after getting your home loan and ensuring the mortgage payment fits within your monthly budget.
A few prudent financial steps now can improve your chances of a great mortgage loan later.
Track your finances carefully, pay bills on time, reduce or eliminate your credit balances, and avoid making any new major purchases.
Category: Debt
