Buying a home is a big investment that helps you secure your future. However, with the current prices, it is extremely hard to get enough money to purchase your dream house. This is where home loans, commonly known as mortgages, come into play. By opting for this type of agreement, you only have to cover 2-20% of the house’s value and pay the rest in installments over 20-30 years. Mortgages have helped millions of people worldwide to become homeowners, and they can do the same for you. If you are interested in knowing how you can obtain a house loan, check out the next few tips.
Consider Your Credit Score
An individual’s credit score determines the interest rate that they can get and whether their loan request will be accepted in the first place. In a nutshell, your credit score denotes your credibility—whether or not you can be trusted to pay your installments on time. The classification of this indicator differs from one country to another, but generally speaking, if yours exceed 800, it is considered excellent. A credit score of 740-799 is very good while one that is between 670 and 739 is good. If yours is less than 670, it will be hard to get a good deal or you may get rejected. You can improve this score by paying your credit card installments on time.
Research the Market
Before you apply for a big loan, you must first research the real estate market of the country you are living in. This entails getting an idea about the average house prices in the area and the average interest rates local lenders provide. For example, the average house price in the United States is around $24-810 per square foot while it is $200 in Brazil. In Australia, it averages at $815. These prices, of course, differ depending on the area, as a house in a luxurious neighborhood in Brazil can cost up to $1860 per square foot. Mortgages have an interest of 7.5% in Brazil and 3.35% in the United States. Australia, on the other hand, does not have 30-year fixed mortgages, so the average interest loan to a variable 5-year loan is 2.59-3.09%. Knowing these numbers can be of great help when hunting down the best house and lender. Banks are often buyers’ first choice, but you can find dozens of reputable online lenders that provide competitive rates.
Get the Down Payment
Usually, borrowers are required to offer a down payment of 2-20% of the house’s value in order to get their loan approved. The bigger the down payment is, the lower the installments you are going to pay in the future will be. Also, some lenders provide lower interest rates for borrowers who offer a big down payment. You can use your savings to pay this lump sum. However, if you do not have enough money to cover at least 2%, you should wait till you amass more savings, as your loan request will certainly get rejected.
Make Copies of Important Documents
To apply for a mortgage, you need to submit some important documents. This paperwork includes your most recent pay stub, brokerage statement, and tax returns. Some creditors may ask for more documents, but these are the most commonly requested ones. This process allows the creditor to gauge if you will be able to pay your installments on time by taking a look at your current income and deciding whether it is sufficient for granting you the loan.
Getting a mortgage is the first step towards being a property owner. Just like any other type of loan, mortgages are a big commitment, so you have to make sure that you will be able to pay back. By following our previous guide, you will be able to get your loan approved and buy the house of your dreams. Just be patient because processing the loan may take up to 51 days.