If you want to purchase your first home, there is a good chance that you are going to need to secure a loan in order to do so. Here are a few tips that will help you get ready and prepared for securing your first loan.
#1 Get Familiar With Your Credit Score
Your credit score will play a big part in what type of loan you are able to afford and what type of interest you are offered. That is why you should request a free credit report from each major credit reporting agency before you start shopping around for a home loan. This will allow you to see if there are any errors on your report and give you time to change them before you start applying for a home loan. It will also allow you to see how you can improve your credit score. For example, if you pay down your credit cards so your debt to income ratio is lower, you boost your credit score and score a more affordable loan.
Take the time to fix any errors with your credit score as well as taking small steps to improve your score, by paying down your credit cards and loans, can help change the loan you will have for the next twenty years or so.
#2 Gather All Necessary Documents
Getting approved for a home loan will require you to produce a lot of paperwork in order to prove your income to debt ratio, as well as your trustworthiness as a renter. Banks want to lend to individuals with good credit who also have a good record as a renter; these traits help correlate to being a responsible homeowner.
The loan approval process will move at a much quicker rate if you have all the resources that you need. Here are some of the documents that you should gather up and have prepared before you even begin to apply for a home loan:
- Last couple months of pay stubs
- Tax returns for the past few years
- W-2s for the past few years
- Multiple bank account statements
- Saving account statements
- Current loan statements
- Credit card statements
- Line of credit statements
- Past landlord information
Try to gather information about your income, savings, debt and housing information. This will help you get through the loan approval process without so much stress as you scramble to find these documents while under a deadline.
#3 Find Out About First-Time Buyer Programs
Finally, you should spend some time researching first-time buyer programs in your state. These programs often provide first-time home buyers with counseling and information about the home buying process works. These programs also often provide financial assistance to first-time home buyers, and cover things such as a down payment on a home or closing costs up to a certain amount.
Researching and using first-time homebuyer programs in your state can help save you money now and in the future if you take the time to find and invest in them.