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Insight To Help You Through The Mortgage Loan Preparation Process

9 December 2021

Eva Kennedy

Preparation is the key to being successful in many areas of life, and buying a home is no exception. When you are preparing to buy a home, you need to evaluate your credit situation and look at what you can afford, then you can start narrowing down your home search options until you find the right one. Here are some recommendations to help you get your home buying preparation going so you will be better equipped to handle the process and succeed with a home purchase at closing.

Research Home Loan Programs

A home loan is essential a majority of the time a home purchase is in the works, so you can take some time to familiarize yourself with the lending process. It is helpful for you to research all the different home loan programs and various types of loan requirements. When you have a good idea of the different types of loans, you will be better able to be ready and know what to expect when you apply and go through the qualification process. 

Check into various loans, such as FHA, HUD, or a VA loan if you are in or retired from military service. Then, you will understand what is going to be required in terms of a credit score and down payment requirements. For example, if you are a first-time homebuyer, you will know that you can look at an FHA loan with a down payment requirement that is just a few percentage points. Otherwise, you may need to have a more sizable down payment, such as five or twenty percent of the home purchase. You will also be able to investigate lending requirements for when you don't put at least a twenty percent down payment, which will necessitate the need for you to pay mortgage insurance with your payment.

Evaluate Your Credit

Another important step in the home buying preparation is to check out your credit reports to see what is on them and what your mortgage lender is going to see. A mortgage lender will request a tri-merged report, which is a combination of all three credit bureau reports. So if you have derogatory information only on one credit report file, it is still going to show up on your credit report and your score. 

The higher your score is on your credit, the better your chances are at getting a better loan program and a lower rate. So the more you can work on improving your credit score, you will save money on your loan's interest costs over the life of your mortgage.

For more information, contact a local lender, like FCCU - First Community Credit Union.

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