It’s very rare that someone has the cash available to purchase a home outright, and this is where a home mortgage loan comes in. But with the way lenders are treating homebuyers in this economy, you’ll probably either be declined or end up paying too much interest. The only way around this is to learn about lenders so you can communicate on their level.
When it comes to getting a good interest rate, shop around. Each individual lender sets their interest rate based on the current market rate; however, interest rates can vary from company to company. By shopping around, you can ensure that you will be receiving the lowest interest rate currently available.
Before applying for a mortgage, pay down your debts. Lenders use a debt to income ratio to verify that you are able to afford a mortgage. A general rule of thumb is 36 percent of your gross income should be available to pay all of your monthly expenses, including your mortgage payment.
Double check to see if your home’s value has declined any before you make any new mortgage applications. Your home may look the same as the day you moved in, however other factors can impact the way your bank views your home’s value, and can even hurt your chances for approval.
Although using money given to you as a gift from relatives for your downpayment is legal, make sue to document that the money is a gift. The lending institution may require a written statement from the donor and documentation about when the deposit to your bank account was made. Have this documentation ready for your lender.
Be sure to compare the different term options that are available for home mortgages. You could choose between a number of options, including 10, 15 and 30 year options. The key is to determine what the final cost of your home will be after each term would be up, and from there whether or not you would be able to afford the mortgage each month for the most affordable option.
Check with your local Better Business Bureau before giving personal information to any lender. Unfortunately, there are predatory lenders out there that are only out to steal your identity. By checking with your BBB, you can ensure that you are only giving your information to a legitimate home mortgage lender.
Lenders look at your debt-to-income ratio in order to determine if you qualify for a loan. If your total debt is over a certain percentage of your income, you may have trouble qualifying for a loan. Therefore, reduce your debt by paying off your credit cards as much as you can.
Learning all the little tricks of the lending trade will help you to find a home mortgage that’s easier to get and that offers fairer rates. You’ll always have to pay more interest than you want, but at least learning about the subject will help you find the best deal. Take the time necessary to learn about lending before seeking a loan.