How to Prepare to Take Out a Home Loan
Now that you have decided to become a homeowner, there are a few things you should get in order before you take the plunge. There are several key steps to follow that will give you a clear cut path for preparing to take out a home loan.
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Instructions
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Determine your mortgage payments and start to cut that amount out of your budget each month. If you rent, take any excess above your rental payment and put it in the bank. For example, if your rent is $1,000 and you anticipate a monthly mortgage payment of $1,500, take the extra $500 a month and put it into a savings account. Doing this for about 6 months will give you a good idea of whether or not you can afford a mortgage payment.
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Get a copy of your and your spouse's credit reports. This includes TransUnion, Experian and Equifax. The information in these reports will make or break your chances of becoming a homeowner and they may not contain what you think. Credit report errors are common and you need to correct these errors before moving on.
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Contact both the credit reporting agency and the creditor if you find any errors on your report. This may include bad marks that are past the 7-year reporting period, accounts that are not yours, collection accounts that were paid showing as unpaid (all collection accounts usually have to be paid off before closing) or anything else that is reported incorrectly.
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Investigate what the average interest rate is for consumers with your credit score. You can get your three FICO scores from MyFICO. Mortgage companies usually use your middle score to determine your rate. There are many online calculators that you can use to see what kind of interest rate you can expect.
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Find a list of mortgage brokers that you want to meet with. Make sure that they quote you a rate that is not much higher than the one you were quoted online. If they quote you a lower rate, great! Once you meet with and get quotes from each broker, you can then decide who you want to go with for the purchase of your new home.
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