Do you need a home loan? At least 99% of all people looking to purchase a home need a home loan. Most of the remaining people don’t need the loan, but will get a loan because they’d rather not spend their own money up front getting one. Getting a home loan has never been particularly easy, but the rules have changed because of the bad economy over the last couple of years, making it even more difficult to get a loan. Here are a few things you will need to consider if you’re hoping to get a loan.
1. What does your credit report look like? These days, being able to respond to issues on your credit report might not be enough for them to look beyond those issues and give you a loan, and if they do, your interest rate might be much higher than the 5% you’ve been hearing about on TV. Make sure to look at your credit report way in advance of requesting a loan, and if there’s any potential issues on that report either try to address them or get someone to put something official down on paper that you can present to a lender.
2. What does your credit score look like? Not having anything negative on your credit report doesn’t mean your credit score is great. Last year, people with credit scores near 800 were being turned down for loans because some lenders didn’t believe those scores were high enough based on many other factors. Hopefully they’ve eased off, but it wouldn’t hurt to know where you stand before looking for a home.
3. See if you can qualify for any home lender programs from other sources first. You’re more apt to get a bank loan if you’ve gone through the process of trying to qualify for first time home buyer status, or any of a number of other programs that offer assistance for things like help with down payments.
4. Have a significant amount of money in your bank account or a promissory note for some kind of funds from another source. Many lenders are requiring prospective homeowners to pay upwards of 5% down on a home these days, but having money sitting in the bank, or a note from yours or your spouses parents saying they’ll be gifting you some funds can help to get lenders to ease off the money. If a lender sees an empty bank account, they may not be all that inclined to help you out.
With these few tips, you’ll have a step up in getting a loan for the home of your dreams.
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Mitch writes on real estate, finance, and many other things.