Home Loan Tips – How to Get a Home Loan
Taking on a home loan is a huge step towards an independent financial future, and the process for new buyers, like many important things in life, can be a challenge.
Even if it feels like an impossible goal, there are a few tried-and-true pieces of advice that could be helpful in propelling you towards financial security, and you can get started without even leaving the house.
Save as much as you can towards a down payment.
The more you can save towards your down payment, the less interest you’ll end up paying throughout the full loan term.
Think about things you can give up or cut back on in order to keep money funneling into your savings account, and you’ll be making a dent in the sale price in record time.
It might mean temporarily sacrificing restaurant outings or wardrobe updates, but by keeping the long-term goal in mind, you can feel satisfied that your money is going towards something more worthwhile.
Get your credit score in order.
Your credit score plays an important part in working out your borrowing power as well as the interest rate on your eventual loan. You can check your score online, and if it’s not what you’re hoping for, you can improve your situation.
There is no quick fix when it comes to improving your credit, but by paying your bills on time, and repaying any outstanding loans as quickly as possible, you’ll put yourself in the best possible position to get a better loan.
You should also give some serious consideration to your credit report and, where possible, have it checked over by an expert before you make any applications. This will eliminate any chance of human error getting in the way of your home loan goals.
It’s important to carefully consider your loan type, lender, and interest rate, as all of the small details add up, and could potentially spoil your best-laid plans.
Whether you’re a first home buyer, a seasoned property investor, or a homeowner looking to refinance, comparing potential lenders and their offers could save you a sizeable sum in the long run.
You should also take the time to understand the difference between conventional and FHA loans, as well as any other relevant loan type, and think about which is the best fit for your situation.
By having a lender check over your credit history and income, you can secure pre-approval and simplify the process of taking on the loan, but you’ll need to be prepared.
Lenders typically want to see three months’ worth of paychecks, your credit reports, and tax returns spanning two years, so make sure you bring as much documentation as possible with you to your first meeting.
Once you’re approved, you’ll have a better idea of your borrowing capacity, as well as your buying power.
Think about the loan term
As a general rule, paying off your loan as quickly as possible is the way to go if you want to save money and keep the extra interest at bay.
A fixed-rate mortgage is typically the best way to do this, especially if you happen to have more funds than you need and are able to chip into the principal loan.
However, circumstances may not always permit new homeowners to throw everything into repayments, and for those cases, an adjustable rate might work better.
These loans begin with a low fixed interest rate for the first few years, and then move into an adjustable rate. Adjustable rate loans generally take longer to pay off, but could relieve stress if you find yourself dealing with fluctuating levels of income.
Get to know the property market
You might think it’s too early in the piece to be looking at available houses, but market research is crucial when it comes to your final loan amount.
If you’ve decided on a city or suburb to buy into, it helps to know the average selling price for homes in that area, even if you don’t have one particular home in mind.
At this stage, property value reports will come in very handy, especially as they cover more than just the estimated price. You’ll also have access to information including sales and rental history and real estate information for the property.
Securing a home loan is the beginning of a long journey for most, and it might seem too far off in the initial stages of saving, but having something to work towards is the first step in reaching that goal.
Make the process as easy as possible by doing the right preparation, and you’ll be signing on the dotted line in no time.