When purchasing a home, securing a home mortgage loan can be a nerve-racking experience. This is particularly true if this is the first time you have ever obtained a home mortgage loan, as you may feel unsure of the process and may be afraid that you are not properly prepared to obtain a loan. To help ease your nerves and to help ensure you successfully obtain a home mortgage loan with the best rate and terms possible, be sure to read through this expert’s guide for securing your mortgage.
Know that Guidelines are Changing
Following the economic crash of the Great Recession, the guidelines and requirements for obtaining a home mortgage loan became far stricter. Since then, these guidelines have relaxed a bit and, therefore, it is now much easier to be approved for a home mortgage loan than it was even just a few years ago. It is once again possible to qualify for a home mortgage loan with a down payment as little as 3 percent. Maximum debt levels have increased, as well, with Fannie Mae purchasing loans with borrowers with a debt-to-income ratio of up to 50 percent. This represents a 5 percent increase from previous limits, thereby making it easier for borrowers with higher levels of debt to be approved for a loan.
Explore Your Mortgage Options
Many first-time homebuyers are surprised to learn that there are several different mortgage loan programs available from which to choose. These programs offer different terms and requirements, thereby offering choices that may make it even easier to qualify for a loan if you qualify. The FHA loan program, for example, allows homebuyers to purchase a home with a down payment of just 3.5 percent, while VA loans offer 100 percent financing as an option. Some credit unions also offer 100 percent financing options. Therefore, it is in your best option to explore the various mortgage loan programs that are available, as one of these programs may be better suited to you than a conventional mortgage loan.
Work on Your Credit Score
Your credit score will have a direct impact on whether or not you are approved for a loan and will also impact the interest rate that you receive. Therefore, it is in your best interest to work on improving your credit score before you apply for a home mortgage loan. You can do this by paying your bills on time, avoiding opening new credit accounts and paying down your debt. Statistically speaking, most home mortgage loans are issued to those with a credit score of 600 or more. Only a very small number of loans are given to those with a score between 500 and 600.
Buy Now to Get the Best Rates
As of June 2018, home mortgage interest rates for a 30-year fixed rate loan are at 4.625 percent. Experts predict these rates will climb to more than 5 percent during the second half of 2018. Therefore, if you are serious about purchasing a home, have a down payment of at least 3 percent and have a credit score of 600 or more, now is the time to buy a home before interest rates climb even higher.