In 2004, nearly 70% of Americans owned a house. While that number has fallen a bit in recent years, brighter days appear to be ahead and more money is becoming available for those needing a home loan.
A report from Home Buyer and Seller Generational Trends in 2017 found that 59% of all buyers used conventional loans to finance their home.
Securing a home loan can be daunting to some people. Home loans work a little differently than loans for things like apartments or cars and it’s important to know the difference. If you’re thinking about or are starting the process of applying for a home loan, here are some steps you can take:
- Know Your Credit Score: With the convenience of online banking, it takes just a few minutes to pull up your credit score. This is very important if you’re wanting to get a home loan. Knowing your score can save you from surprises. The last thing you want to find out is that your score is lower than you thought or there’s something in your credit history you forgot about.
People with credit scores under 500 generally are ineligible for FHA loans. However, the FHA will sometimes make allowances for applicants who have “nontraditional credit history or insufficient credit” if they meet requirements.
- Save Money: Most home loans require some sort of down payment, so not having cash on hand is another potential road block. In fact, a 2017 report from Home Buyer and Seller Generational Trends Report conducted by the National Association of REALTORS, found that saving money for a downpayment was the hardest step for people in their quests to buy homes.
Most lenders set their own requirements for a down payment, but keep in mind that the bigger the down payment you make, the more it’s going to help you in the long run. Keep in mind that home loans and mortgages offer require other expenses like closing costs and home appraisals.
- Keep Working: Remaining employed during the loan process is critical. Quitting or job or getting fired from your job cuts you off from a much-need money source and employment changes can put yet another snag in the application process. A loan application is often approved based on whatever information you present at the time. Changes in employment will probably cause lenders to review your finances.
- <Manage Debt: Having credit card debt won’t stop you from getting a home loan, but the less you have, the better your chances are. Lenders look at how much debt you have and too much could be a hindrance. Paying off credit card debt could help your chances of securing a home loan. On the flip side, don’t drive up your credit card debt during the application process or once you’ve been approved.
- Budget: When it comes to home buying, it’s important to have a budget. Living in a large house is nice, but it won’t be that way for too long if you can’t afford it.
The bottom line comes down to this: if you’ve got too much credit card debt or some financial troubles, deal with them and use it to motivate yourself toward your goal of homeownership. Take time to find out and improve your credit score and when it comes time to apply for home loans, set a budget and stick to it.
There are many types of loans available and regardless of which one you’re working toward, it pays to get your finances in order. To qualify for an FHA home loan for example, your credit score must be at least 580; you must refinance up to 97.75% of your primary home’s value and buy a home with as little as 3.5% down.
When it comes to finding current mortgage rates and up to date mortgage rates, it’s best to check with national lenders. Mortgage rates change all day, every day. Up-to-date mortgage rates are based primarily on the prices of mortgage-backed securities. These work like bonds and are traded similar to stocks. That means the prices on them change constantly. To find the most current and up to date mortgage rates, it can pay off to check on Mondays when a new trading week begins.