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Tips for Becoming Pre-Qualified for a Home Loan

23/01/2009 17:28

 

To buy any real estate, many real estate agents and sellers only accept offers from buyers who have pre-qualified for a home loan or have cash available. It is uncommon that someone has sufficient money to purchase a new home without some kind of financing required.

Your Credit History Makes a Difference

Pre-qualifying for any loan is heavily based on your present credit report and your debt to income ratios. Lenders want evidence that you have paid bills when due, have the means available to handle the mortgage for which you are applying and that you are not presently behind on any of your monthly payment loans.

While a poor credit score is not necessarily %the kiss of death to a% mortgage pre-qualification, having a low credit score typically means a higher interest rate. For the most part, the worse your credit is, the more you will pay totally when taking a loan from a financial institution.

Your best plan of action is to make certain you pay on time. Moreover, never get in over your head with debt. Download a copy of your credit report before you fill out an application for any loans and confirm that the information is accurate. If it shows late payments that were not, in actual fact, late, get canceled checks and bank statements to prove it and then write or fax the credit bureaus and ask for that information to be corrected. The same is relevant to accounts that are not yours or unauthorized charges.

Shop Online for Rates

Bank interest rates will vary. To begin with, you will find adjustable and fixed rates. When it comes to adjustable rates, your starting interest rate is low, but it may go up or fall depending on what the prime rate does and the indexes that it the loan is tied to. While adjustable rates can be attractive to the bargain hunter, your mortgage payment usually increases throughout the life of the loan making it tough to get a hold of your mortgage payment.

Fixed rates remain steady throughout the life of your loan, so that you understand precisely how much you will be paying for the coming fifteen to thirty years. With the arrival of the Internet, it is much quicker to find rates that fit your pocketbook. Many online sites will even compare rate for you so that you have a bargaining chip to get banks to compete for your business.

All interest rates are associated with points. Points are a percentage of your loan amount that you pay to get a lower interest rate. You will find points varying from zero to three. Most buyers decide on zero-point loans because they can not come up with the extra money required. Talk to your lender about the alternatives. The majority are more than willing to work out a mortgage loan that suits your needs.

Do Not Buy More than You Can Handle

Though not as common, it used to be that lenders and realtors were more than willing to help you buy a home beyond your budget by using risky mortgage plans like interest-only loans. Often, these loans are reasonable, but do not permit you to develop any equity in your home.

Instead, consider how much money you can comfortably afford to pay every month and apply for no more than that amount. You can always talk sellers down in price and you will have the home you like at a monthly payment you can easily afford.

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