Buying a home is always exciting, but if you want to be sure there are no surprises on closing day, there are ways you can prepare yourself ahead of time. There is a lot of documentation and paperwork needed to close on your loan, but a mortgage involves much more than that. Your loan company will have certain requirements you have to meet before the paperwork is approved, and if you want to familiarize yourself with some of these requirements, below are a few things to keep in mind.
1. Try to Put More Than the Minimum Amount Down
Different loan types will require different down payments, usually expressed as a percentage of the home price. While some loans are available with no money down, these are not that common, which means you should learn ahead of time exactly what that percentage is. Even better, try having a bigger down payment than what is required because this means you’ll owe less from the very beginning.
2. Look for Alternative Methods of Financing
When people take out a mortgage, they usually go to a bank first, but you might want to consider shopping around for alternative institutions as well. It’s easy to find financing options other than traditional financial institutions, and a lot of these facilities offer better terms and lower interest rates, which means you’ll save a lot of money over the life of your loan.
3. Don’t Forget to Go Online
A local bank or financial institution is great, but don’t forget to look online because many online companies offer excellent rates and terms that you simply can’t get anywhere else. There are also online brokers who will shop around for the best rates and then provide you with that information so you can decide for yourself what the best option is.
4. Check Your Credit Score
The number on your credit report matters because that score is what determines what your interest rate will be. If your closing is several months away or you are just starting to house-hunt, you might even have time to work on your credit score, which means you might have enough time to raise it before closing day.
5. Keep in Mind All of Your Fees
Taking out a home loan always means paying a lot of different fees, and if you know ahead of time what those fees are, you’ll be better prepared to pay for them. Ask the loan company for an estimate of the fees you’ll be paying so that you can start saving for all of them. Most loans have the same types of fees, so it shouldn’t be difficult to find out what these numbers are.
6. Always Know How Much House You Can Afford
This is one of the first things you should do before going out with a realtor to look at houses. You’ll need at least an estimate of what you can afford so you’re not looking at houses you can’t afford or houses that are below your means and maybe too small for you. Once you have a certain amount in mind, it becomes much easier to save time by only looking at homes you can afford or meet your needs
7. Always Compare the Numbers You Receive
Whether it’s fees, the down payment, or the interest rate you’ll be paying, it’s best to compare those numbers from among three different mortgage institutions. Not all financial companies are alike, but make sure you also compare all the numbers, not just one or two of them. Take everything into consideration so you’re comparing apples to apples. This is the best way to find the best company to help you.