Purchasing a brand new home is an exciting time. There are a lot of decisions to be made during home shopping, such as deciding if you want a cape style home on several acres or a townhouse in the center of town. Prior to looking at homes with your real estate agent, you should seek out approval for a loan. Here is what you will need to get qualified and how to prepare.
In order to qualify for a traditional mortgage, you will need to have available income. The fewer debts you have, the easier it will be to qualify for a mortgage. If possible, pay off all of your credit card debts and pay down any car loans or student loans in order to free up more income. It is common for home loans to be three times your yearly income, if you have healthy income and credit.
Get proper credit history
A 620 or higher credit score is the usual standard when applying for a mortgage. The higher your credit score, the better your interest rate, which means the mortgage loan will cost you less over the course of time. Make sure you have a credit history that shows stable monthly payments, with a high available credit balance. You can gain good credit by opening up credit cards, both secured and unsecured, or getting installment loans. Be sure not to apply for too many credit products at once, or the inquiries can bring down your score and cost you a mortgage approval.
Clear up bad credit
If you have bad credit and a low credit score, you will need to clear up your credit history prior to getting a home loan. Make a deal to pay off any old or delinquent debts with the companies that hold them. This information will be available on your credit report. Companies are often eagar to make agreements with consumers to pay off older debts for less than what is owed. Make sure that the companies agree to update your credit report to how that the debt been paid.
Once you have paid off all of the older debts on your report, and acquired brand new credit lines, there is another, unique step that you can take to make sure your credit is clear. Getting a credit inquiry for a mortgage loan is a great way to find credit companies that may be lurking but not yet on your credit report. Many consumers report that as soon as they apply for a mortgage loan, they find new items hit their credit report. This often happens because credit companies know that old debts must be cleared before mortgage companies will offer a loan. If you think that you may have old debts in hiding, apply for the loan, then get these cleared up. Once you have cleaned everything in your financial life, you will be qualified for the Portland, ME home of your dreams.