Today, many first-time home buyers put off getting a mortgage because it seems like a time-consuming and stressful process. Contrary to popular belief, applying and qualifying for a home loan is a relatively simple process. With good credit, a steady job, and cash for a down payment, you’ll be able to easily apply for a home loan and determine what you can afford. For navigating the home loan process, keep reading.
Get your documents in order
In order to begin the home loan application, you’ll need a form of personal identification to verify your identity. Primary ID can be presented in the form of a passport, driver’s license, or state-issued photo ID. If you can’t provide one of these documents, you can present two forms of secondary identification. Forms of secondary identification include birth certificates, citizenship certificates, and utility bills with your name and address.
Next, you’ll need proof of income to determine your eligibility. Employees typically require two years of tax returns, W2s, and paycheck stubs. In addition, two to three months of bank statements and proof of down payment are required.
Get a copy of your credit reports
After getting the proper documents in order, it’s time to obtain a copy of your credit reports. You’ll need a copy of your credit reports from all three major bureaus. Annualcreditreport.com, a government-run site, allows users to obtain free copies of their credit reports once annually.
Once you’ve obtained a copy of your credit reports, you’ll need to check each report for errors. If you find any errors, contact the respective credit bureau as soon as possible to file a dispute. Make sure to look for incorrect employers, inaccurate addresses, late payments, and credit inquiries that you don’t recognize.
Check your credit score
Since your credit score is a major factor when it comes to qualifying for a mortgage, consider taking the time to improve your score before applying for loans. Free services like CreditKarma can show you a comprehensive overview of your credit score within minutes and highlight potential areas of improvement.
To increase your credit score, start paying down credit card balances. Aim to use less than 30 percent of the credit available to you in order to improve your score. In addition, hold off on applying for new lines of credit, including loans and credit cards. Applying for new credit results in a hard credit inquiry and adds more debt to your account. Finally, set up autopay to ensure that all bills are paid on time, as late payments can negatively affect your score.
Get pre-approved for a loan
Getting pre-approved for a home loan can give you an idea of what you’ll be able to afford. In fact, many real estate agents will refuse to show houses if you haven’t been pre-approved for a loan. Therefore, it’s imperative to get pre-approved before you begin your search for a home.
In order to get pre-approved, you’ll need to speak to a lender. Loan officers will then check your credit, verify your income and assets, and look at your bank statements and paychecks. The process of being pre-approved for a mortgage is usually finished within minutes.
Once you’re pre-approved for a loan, you can start considering down payment options. Since first-time home buyers often have less in savings, low down payment options are popular. Researching different types of loans, from FHA loans to conventional mortgage loans, can help you find the down payment option that works best for your budget.
For many first-time home buyers, applying for a loan can seem like a paramount task. Ultimately, properly preparing and researching different types of loans can help you find an option that works for you, bringing you one step closer to buying your first home.