Home loan, which another term for a mortgage or home mortgage, refers financial aid which you get from a mortgage company. This aid is then used to buy a house and turn it into a home. It is an easy way to get the home of your dreams and put down roots.
How this work is you transfer the title of the house to the mortgage company. When you have paid the loan in full, the deed is transferred back to you. The home loan is basically of two types. They are fixed interest rate and floating interest rate.
Using a mortgage calculator helps you have a good estimate of the cost of your loan. Before you get a home loan, there are things you should be aware of. We will be talking about this here, as well as, how to get pre-approved.
What You Need to Get a Loan For Your Dream Home
Anyone who wants to buy a home using a mortgage has to be aware of a few things. You don’t just go trying to get a home loan without researching. Here are things you need to know to ensure you successfully apply for a mortgage.
- Know your credit score. A good credit standing gives you a high chance of getting a mortgage with a low-interest rate.
- Find out the cost of the home you can comfortably afford. Use a mortgage calculator to check this.
- Look out for special mortgage programs which can help you reduce the cost of a home loan.
- Not all low mortgages interest rate are the best for you. Check out some of the riskier ones like negative amortization. They might actually suit you better.
- Has spare cash lain around? Put up a down payment.
Getting yourself acquainted with these will help you get your home loan. Never make a huge financial decision without looking for better options. You might find the best options in the unlikeliest of places.
How to Get PreApproved for Your Home Loan
If you are serious about getting a home loan, the first place you should start is the office of the mortgage firm. Getting a pre-approved letter first allows you to find out the options available to you. Also, the mortgage officer can bring your attention to any issues on your credit report. To get pre-approved, here are the things you will need.
Evidence of Income
Anyone looking for a home loan has to provide income statement for the past 2 years. The income statement is usually current pay stubs that show income earned. You will also provide a W-2 statement and evidence of extra income earned. Current tax returns document is also needed.
Evidence of Assets
The mortgage/lenders office will also need assets which you have. These assets include investments, bank statement and the cash reserve you have. This is to ensure that you have the money to make down payments as well as closing cost. If you are taking out an FHA loan, you will need to make a down payment. This is usually 3.5% of the cost of the home you want to buy.
A Good Credit Score
Having a good credit means a lot when taking out a loan of any kind. As lenders always give lower interest rates to owners of a high credit score. Credit score range of 750-800 is considered as a good credit score. Should your credit score fall below this, you get a higher interest. The lower your credit score the higher your mortgage interest rate. If you would like to get an FHA loan, you need a credit score of 620. Anything lower means you will pay a large percentage of your home cost as down payment.
Confirming Your Employment
In order to confirm that your employed and really earn an income, the lender will try to confirm your employment. This will most likely be done through a call. Your employer will confirm your employment and your salary. In order to ensure that you have a steady source of income. This process is different for borrowers who are self-employed.
Documentation involves submitting a copy of driver’s license as well as your social security number. In addition, you will need a signature to retrieve your credit report. You might also require extra documentation. However, this is at the discretion of the lender.
Getting the pre-approval letter can take a while. Exercise patience and you will get it. You will get your home loan when the final appraisal is done.