Buying a house also entails the need for financing. For this reason, you need to choose a lender and apply for a mortgage loan. Choosing a mortgage is the first step to owning your dream house. Unfortunately, it can be a very arduous task, especially if you have no idea how to go about it.
But before you start going from one lender to another, you must first determine the amount of mortgage you can afford and one that will fit your current budget. This is essential since failing to pay your mortgage on time can definitely affect your credit score; thus, it can damage your ability to purchase a home later on.
Evaluate Your Current Financial Capabilities
It is essential to determine how much mortgage you can afford. Remember that banks and lenders can qualify you for a loan that might be more than you can afford to pay monthly. With that said, you are responsible in budgeting your income and expenses, and determine how much you can manage to pay for each month. Aside from the monthly mortgage payment, you must also take into account the taxes, insurance, and so on.
Clean Up And Improve Your Credit Score
If you have a high credit score, it will allow you to borrow more money at a lower mortgage rate. To help you get the best possible deal from banks and lenders, you must first get a copy of your credit report. Check your score before applying for any mortgage loan. In doing so, you can take the time to improve or fix any errors before applying for a mortgage. If you have a low score, you must spend at least half a year paying all your debts and loan payments on time; paying off the balances on your credit cards; and closing the credit cards you don't use often.
Pre-Qualify For A Loan
To have an idea of the amount you can borrow, you can apply for a pre-qualification. You must talk with a lender and provide him or her all the necessary information about your assets, liabilities, and your income. The lender will then evaluate your financial status and situation, and then provide you with an estimate. Knowing the amount of mortgage you qualify for will help you determine a budget and set the price range of homes you can consider when house hunting.
Remember that the pre-qualification process is not final and may change if there are any major changes in your financial status. If you are serious about buying a property, you can also get pre-approved for a mortgage. With this application process, the lender will check your credit score, verify your employment information, and confirm your ability to pay for a mortgage.