One of the most confusing parts of buying a home is the mortgage loan portion. Financing is confusing and knowing what you need to apply for or what you would qualify for is difficult to know. Because of that too many homebuyers rely on their lender to recommend a mortgage to them and help them through the process. However, this is not always the best idea because the lender doesn't have your best interests at heart but rather the bank's best interest at heart. So, consider the following tips before you apply for a mortgage loan. They just might help you get the loan that is best for you!
Tip #1 Credit Report
Your credit report is what most lenders look at heavily to decide whether you are approved for a loan or not. If your credit score is high then you will likely be approved and have a low interest rate. If your score is low you may be denied or else be offered an extremely high interest rate. So, since your credit report plays such a huge role in whether or not you are approved you should know what is in your report before you ever apply. Many times there is information in your credit report that is incorrect and that will negatively impact whether you are approved or not. If there is negative information in your report you should have it corrected before you ever apply for a mortgage loan. Making sure your credit report has all correct information will make sure you get the best mortgage loan and interest rate offer possible. If you are applying with your spouse then check their report as well to make sure theirs is correct as well.
Tip #2 Make Changes
Now that you know whether there are mistakes on your credit report or not you can start making changes. You will have to report errors to the credit bureau that is reporting the errors to have them corrected. It may take some time so be patient and don't apply for a mortgage loan until the errors are corrected.
Tip #3 Raise Your Credit Score
You will also want to take the opportunity to review your credit score while you are looking at your report. Doing so will show you what you need to do in order to increase your score. If you see late payments, credit cards over the limit and you are using almost all of your credit then you know you have some room to increase your score. Start paying your bills on time, reduce your overall credit to debt ratio, and don't apply for more credit. Doing this will gradually improve your credit score and within a few months you will see a big difference. Once your score is up you should apply for your mortgage loan. This will increase your odds of being approved and more than likely get you a better interest rate as well.
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