Prior to shopping around for a mortgage, there are some things that you should be aware of, that can assist you in selecting the most ideal loan option and for which your loan approval chances will be better.
Credit reports and scores should be requested and reviewed, as these can be obtained free of cost. It is also recommended that you request and review the scores of all persons who are borrowers of a home loan. One free copy can be ordered annually, from the three major credit reporting bureaus as stated in federal law. The advice of the Consumer Financial Protection Bureau to consumers, is that credit reports should be reviewed in detail to ensure the accuracy of the information contained. This will be an opportunity for you to be alerted to any possible errors in reporting, or any potential credit card fraud, which can result in the lowering of your credit scores and negatively impact your ability for qualification of a home loan.
Any credit reporting issues should be addressed before contact with potential lenders is made, concerning quotes for home loans. Credit problems could include late payments, high credit card balances or any collection activity, and these should be fixed prior to purchasing a home. In the event that you had filed for bankruptcy, you may be eligible for a home loan two years after the discharge of your bankruptcy by the court. If you have a foreclosure in your credit history, then three years after the foreclosure, is the time period that must pass before you are eligible for a home loan.
Determine the down payment and closing costs to ensure that you can afford them. Although you may be able to make a down payment of 3.50 percent of the amount for which the home is appraised, down payments of less than 20 percent of the value of the home, will require private mortgage or FHA mortgage insurance. Premiums for mortgage insurance are always included in the monthly loan payments of borrowers. An upfront premium that will be due at closing, is usually a requirement for borrowers of FHA loans. Closing costs can be calculated with the assistance of your real estate agent, however there is a possibility that costs will change between the time the offer is made on a home and the closure of the sale.
Your eligibility for a VA loan should be determined. Military veterans, surviving spouses of veterans and service members, are eligible for home loans from the Department of Veteran Affairs. The approval requirements for VA loans are flexible and no down payment is required. VA loan approval however is not guaranteed just because of eligibility.
Unwelcome surprises during the process of loan approval or at the closing, can be avoided if you are knowledgeable concerning your credit standing, as well as down payment and closing costs options.
First-Time Buyer Programs Offer Down Payment Help
First-time home buyer programs are helpful, if this will be your first home purchase and the cash available for down payment and closing cost is short. Local community development programs and/or state housing finance agencies provide sponsorship for these programs. In exchange for a “silent” second mortgage against the home you are purchasing, down payment assistance funds are provided by them. It may be even possible that no repayment of this type of home loan is required, until the borrowers no longer reside in their home.
Assistance with credit counseling, budgeting and locating home buyer programs, can also be provided by HUD-approved housing counselors.
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