We all know that in order to get a home loan, a lender has to believe that you’re able (and willing) to repay a mortgage. But how does a lender determine whether they’re willing to give you the cash – and what can you do to make the process easier?
How to Smooth Out the Lending Process
Whether you’re a first, second or third-time homebuyer, it’s important that you follow these four steps to make the lending process go more smoothly for you.
1. Improve your credit score. The higher your score, the lower your payments will be; that’s because you’ll get a better interest rate. Lenders consider you more likely to repay a loan when you have a history of having done so with other creditors.
2. Get a good picture of your debt-to-income ratio. Your home expenses shouldn’t exceed 28 percent of your gross (pre-tax) monthly income. Multiply your gross monthly income by 0.28 to figure out your highest reasonable mortgage payment. That way, you can shop North Florida homes for sale in a realistic price range.
3. Save up for your down payment and closing costs. Stash away as much as you comfortably can so you’re prepared for the down payment – and bear in mind that closing costs can run into the thousands.
4. Get preapproval before you seriously home-shop. The preapproval process will help ensure that you’re ready to apply for an actual mortgage loan, and besides that, it will show you exactly how much money you qualify to borrow. When a lender gives you preapproval, any offers you make will stand out.