For most people, a home is the largest asset they will ever own. Before you go out and purchase a home, though, there are a few things you need to do so you can have as easy a home loan process as possible. Taking the right steps in advance can ensure that you are able to get the home loan you need and the one you want.
Know Your Credit Score
Your credit score is perhaps the most important aspect of securing a home loan. Since home loans are often in the range of hundreds of thousands of dollars, and paid over the course of 30 years, even a small increase in your interest rate can make your monthly payments higher and increase the total amount you will pay in interest over the life of the loan. You should find out your credit score at least 6 months in advance of even searching for a home so you have time to improve it if necessary.
Correct Credit Score Mistakes or Issues
After checking your score, the next step is to make sure it’s as high as you can possibly get it before you apply for a loan. That means:
- Paying down revolving debt (such as credit or store accounts)
- Making all your payments on time
- Correcting any mistakes that you find on the report
- Closing accounts that are paid off
Mistakes can take several months to correct, so be sure to call the credit reporting agency immediately if you find something in the report that is incorrect. Also continue making payments on time ever month on any accounts you have to avoid any negative information on the report between now and when you apply for the loan.
Don’t Take Out Any New Loans
Your credit score is also impacted by recent credit checks. When you get a new loan or make a large purchase such as a new vehicle, the lender will check your credit, and each credit check will lower your score slightly in the short-term. Having a series of recent credit checks could be a red flag to your potential home mortgage lender that you have too many outstanding debt obligations, and might have trouble making payments on your home loan.
Prepare to Prove Your Income
Lenders like to see that you have a steady source of income, and will also want to review your existing assets (such as checking and savings accounts, or other investments and income) prior to approving a home loan. It’s best if you can demonstrate that you have been at a job for several months or years prior to getting the loan, and have paystubs to prove it.
When you have all these things in order, the next step is to get pre-approved for a loan so you know what your budget is and can begin shopping for a home you will love. If you have any questions about the home loan process, talk with one of our mortgage specialists to find out more! Give us a call at 801-627-8700 or visit your local Wasatch Peaks branch.
