If you are getting ready to buy your first home you might be wondering what you can do to improve your chances of getting the loan and getting a good deal. Here are some simple things that you should be doing months before you buy the house.
1. Avoid Opening New Lines Of Credit
You credit score will play an important role in the house that you are able to buy and the interest rate that you get. In fact, how good your credit score is will directly affect how much you pay in interest each month. Many people don't realize how opening new lines of credit will affect their credit score. For example, every time you apply for a new credit line, even if it is just a credit card, it is called a credit pull. This is when the potential lender pulls your credit score. Each time your credit is pulled it will damage your score. Thus, if you apply for a car loan, a credit card, or try to get another loan during the process of buying a home, you will hurt your credit, consequently giving you a worse credit score. Thus, wait to open new lines of credit till after you get into the house.
2. Save, save, save
Another important part of buying a house is having a good down payment and savings account. When the lender looks at your finances they will try to see how much you carry in your bank account over the last couple of months. If they see that you are spending more than you make each month, this could be a red flag.
In addition, having a good down payment will increase your chances of getting the loan and will save you money. It will first save you money by preventing you from having to get private mortgage insurance (PMI). PMI is required when you put down less that 20% on the house. Thus, if you can put more down you can save money each month on insurance.
Additionally, the less loan you have to take out, the less interest you will pay each month. So over the years you could save thousands and thousands of dollars by just putting down a bigger down payment initially. Although it may be hard to save for the down payment, it can be the best thing for you in the long run.
By understanding these things you can be prepared to get a home loan when the time is right. These tips make things easier for first time home buyers.Share