If you’re considering a home loan, there are a few things you should know in advance in order to get the best deal with the most reliable broker. Here are just a few dos and don’ts for securing a home loan.
Do: Improve Your Credit Score
A good credit score can significantly reduce the amount of your down payment. For example, borderline credit scores may result in a down payment of as much as 25 percent of the loan amount, but good credit scores can slice that figure all the way to two percent.
Don’t: Focus on Credit Exclusively
Credit scores are important, but they aren’t the only factor that will weigh on your application. Your debt-to-income ratio (DTI) is another figure that will be scrutinized by banks and brokers, and the lower it is, the more likely they are to take a chance on you.
Do: Understand Your Options
Home loans come in many different varieties, and the right one for you will depend on things like your budget, property value and overall 10-year plan. For example, if you can afford a fixed-rate loan, you’ll never have to worry about market fluctuations. On the other hand, if you’re looking for the most cost-effective option, you might want to go with the variable-rate loan that has a low initial rate.
Don’t: Get Your Heart Set On Anything
Sometimes you won’t qualify for the loan you want. This isn’t a permanent rejection; you can re-apply as soon as you fix your credit or get that promotion at work.
Do: Compare and Contrast Loans
Before you apply for a particular loan, make sure there aren’t any better deals elsewhere. Look at things like fees, interest rates, special offers and payment options. Scour the web carefully to find the perfect loan for you.
Don’t: Be Unrealistic
Everyone dreams of a staggeringly low fixed-rate loan with a five percent down payment, but that is not always the reality. Stay flexible when it comes to your loan options. Consider all the possibilities, even the ones that you don’t think you want. You might be surprised at how happy they can make you later.