Buying your own home is a very exciting milestone for anyone, whether you are married or not, or if you have children or not. It is an achievement that most adults hope to reach.
But as with any kind of accomplishment, it does not come for free. It’s natural that you need to consider your finances when purchasing a house. If you are someone who’s a bit short on finances but would still like to buy a house, then here are some tips for finding a good home loan supplier to finally get the house of your dreams.
1. Get your credit score in good shape.
Your credit score is a numerical value that represents how responsible you are in paying your debts. Lenders and creditors see your credit score as a sign of whether you will be a good debtor or not.
Therefore, if you are looking for a home loan supplier, it is best to keep your credit score in order first so that you can qualify for a bigger loan or secure a home loan that has a low interest rate and may not require a massive amount for down payment.
To find out what your credit score is, you can ask for a credit report from reputable credit bureaus like Equifax and TransUnion. You also have to make sure that the credit report you are given is accurate. There are some cases where the report is inaccurate, resulting to a low credit score.
If you have a low credit score, then you have to be responsible and pay your debts first.
2. Shop around for a good home loan supplier.
When shopping around for a lender for your home loan, you have a lot to choose from like:
• Banks – Banks are the most prominent players and the most popular in the mortgage market. Almost everyone knows their name and the products they offer as they often advertise in mainstream media.
• Credit Unions – Credit Unions are mostly considered cooperatives. This means that the owners of the credit unions are the members. They also are not as popular compared to banks and their debtors are often their members.
• Monoline Lenders – Monoline lenders are not very popular, and they make up fewer shares in the mortgage market. This is probably because monoline lenders are often only accessible through a mortgage broker like www.geoffleemortgage.com.
Most of monocline lenders also don’t have a physical office to lessen their overhead cost. However, they offer very competitive interest rates, and the approval process can be very quick.
They are a good choice if you have a difficult financial situation as they are very flexible in terms of penalties and other issues.
• Private Lenders – Private lenders are ideal for a high-risk applicant like people with low credit scores or people whose application would probably get rejected by other lenders. Private lenders can give you a home loan through pooling money from shareholders or a group of individuals.
However, they offer a higher interest rate compared to other lenders and have a lot of additional fees.
Looking around for good options that fit your budget and requirements is essential to find the best home loan supplier. If you do not have the time to do this, looking for a Vancouver mortgage broker might be the best option for you. They will find the options for you to compare so you can spend less time researching and browsing through the internet.
3. Get pre-approved by a lender.
Getting a pre-approval only means that a lender has taken a look at your financial status and through that, they can estimate the maximum amount of loan that you can qualify for. It does not necessarily mean that the amount stated in your pre-approval will be the amount you will get.
Getting pre-approved is a good thing because:
• It will allow you to know the highest possible amount you can get, therefore you already have an idea of the appropriate price-range of the house you can buy.
• It also allows you to calculate an estimate of your mortgage payments.
• It allows you to lock in the interest rate for the next 2 to 4 months depending on the lender’s policies.
To get pre-approved, you must submit the following:
• Valid identification
• Proof that you are employed
• Your credit report
• Information about your other assets like cars, boats or other valuables
• List of your current debts
4. Get a mortgage.
To prove that you can afford to pay the mortgage you are asking for, your lender must be able to certify that your income is enough to pay the loan. For this, you have to think of these numbers:
• 32% - Your GDS (Gross Debt Service) ratio. This means that your monthly housing costs must not exceed 32%. To find out what your housing cost is, add the amount of your monthly mortgage payment, property taxes, heating costs, and other applicable and related fees.
• 40% - Your total debt service ratio. This means that the amount of your monthly payable debts must not exceed 40%. Monthly payable debts include credit cards, auto loans, spousal support or alimony, child support, and other lines of credit.
Getting a home loan supplier is an important part, if not the most important part, in buying your house so make sure that you do it right. Don’t decide in haste and make sure that you have thought things through before signing the deal.