What You Need To Know Before Applying For A Mortgage

Are you planning to buy a house or any real estate properties? Then you need to apply for a mortgage in order to make the loan payments reasonable and affordable. But applying for the mortgage is not as easy as it may sound. There are a lot of steps and procedures that you may have to follow in order to apply for a mortgage. What are these steps? If this is your first time dealing with loans or mortgage, you may need to know certain things before you apply. We have provided all the details below regarding the aspects that you need to consider or know while applying for a mortgage. Read on.

THINGS YOU NEED TO KNOW BEFORE APPLYING FOR A MORTGAGE:

Here are some of the important things you need to consider:

1. GOOD CREDIT SCORE

In order to get a mortgage, it is better if your credit score is high. Having a good credit score can leave a good impression on the lenders. Of course, the lenders will be cautious when they are lending money. So, the buyers with bad or poor credit scores will be their last priority. Even if the lenders accept their application, the interest rates will be higher.

If you have a good or excellent credit score, then there is a better chance of you securing a mortgage at a low interest rate. Hence, you have to get a copy of your credit report and make sure that it is good or excellent. In case the credit score is not good, pay off all the outstanding debts. These include your personal loan as well as credit card balances. It can help you to improve the credit score.

2. DIFFERENCE BETWEEN MORTGAGE PREAPPROVAL AND MORTGAGE PREQUALIFICATION

When you are buying a house, most people either opt for mortgage prequalification or mortgage preapproval. But there is a misconception that these two are the same. They are not! Mortgage prequalification helps you to get a conditional approval for a mortgage. In this case, you will know how much you can approximately borrow for buying the house. This estimation will be provided to you on the basis of your employment status, income, bank account and credit information.

On the other hand, mortgage preapproval is done by a lender who has thoroughly assessed and analyzed your financial status. Here, the lender can provide you with an estimated total about how much you can borrow and what the interest rate will be. The preapproval is generally done after you have gone through mortgage prequalification stage. But preapproval doesn’t necessarily mean that you will get the mortgage. If all the main factors remain the same, you can likely get it.

3. GET ALL THE PAPERWORK DONE

When you are applying for a mortgage, it will require a lot of paperwork to do. You need to have all the essential documents related to your financial records i.e. credit score, bank statement, credit balance information and more.

Having all these documents with you can help to speed up the entire process of mortgage. Most of the lenders will ask for the last two years of tax fillings, credit payments, bank account statements and more. In case you have any large withdrawals or deposits recently, you may have to explain it in detail.

4. AVOID MAKING CHANGES IN YOUR FINANCIAL STATUS

Unless and until your mortgage is finalized, each and every change in financial status will affect the approval decision. Even if any opportunity seems quite tempting, you must resist that urge to buy something too expensive. Your lenders not only have their eyes on your credit score. They even analyze the bank accounts.

Keeping the account stable is one of the key factors to get a quick approval. Hence, do not make any large withdrawal. Even larger deposits of money can draw the attention of the lenders. So, unless and until you get the paper signed about the approval of your mortgage, it is better not to spend too much of money at a time.

5. CONSIDER THE ADDITIONAL FEES

While you are focusing mainly on the down payment to get a better rate of interest on your mortgage, you may forget about other fees. Depending on the lenders, there can be some additional fees too regarding the mortgage. Some of the common additional fees include – commissions to the broker or the real estate agent, appraisal fees and application fees.

You may also have to pay an additional amount for title search as well as insurance fees. Some of the lenders can also charge an extra fee if you pay off your loans earlier than the actual term. While most of the fees are non-negotiable and unavoidable, there are some that you can negotiate. You have to talk to your lender about this.

6. SHOP AROUND BEFORE YOU FINALIZE

Before you apply for the mortgage, you need to do a bit of market research. Shop around to know about the best and most reliable lenders in the market. You can shortlist some of the best lenders in the market to apply for the mortgage. You can either find out the most experienced and reliable lenders online or you can even ask for recommendations and referrals.

You can talk to those lenders about how much you can borrow and what the rate of interest will be for paying off the loan. These lenders will assess your credit score, financial condition and employment status thoroughly before they provide an estimated total amount to lend. The amount generally varies from one lender to another. Even the rate of interest can vary. Hence, it will help you to choose the best deal for your mortgage.

TO CONCLUDE

These are the top 6 most important things that you need to know before you apply for the mortgage. Applying for a mortgage is a very serious decision and you need to consider all the important factors before the final decision. Hopefully, the things that are listed above will help you to take the final call more efficiently in order to apply for the mortgage.