You’ve finally got everything settled after months of trying to find your dream home. Your things are all packed and the seller has marked the listing as reserved. Next, you have a meeting with the seller in a few days to finalize everything. Besides, you’ve made an appointment with a mortgage lender to further discuss things in detail. No wonder, you might be thinking how to manage finances before to apply for mortgage loan.
It might not be too obvious, but it is the most important part of the whole home-buying sequence. The process of getting a mortgage loan is the key. You don’t need it if you have a huge amount of cash in the bank. Like most of us, chances are that you will need to get a mortgage loan. It is a process that involves having to discuss your finances with a lender to see if you’re eligible.
The details of financing your dream home
During the pre-approval process, a mortgage lender will have to learn more about your financial profile. This means that they’ll take a close look into your credit history. Also, they will look into your assets, credit score, and bank statements to further understand the financial situation you’re in.
This process will enable them to give you the loan options that you qualify for. This is will help you so that you don’t have to struggle to work within a restrictive budget every month. In order to get the best mortgage loan option possible, you’ll have to look at your credit score in particular. The credit score greatly affects your qualifications for different loans.
Before seeking out a mortgage loan, you may want to look at your credit history. Carefully check if there are any debts owed. Next you need to check your new credit, the duration of your credit history as well as your payment history. All these things impact your credit score. Aside from that, you may want to also look at your bank statements. This is because the mortgage lender will take a look at your details of past 2 or 3 months. He will look at your late payments, large deposits, overdraft charges, and large withdrawals to analyze your financial capability.
How to manage finances before applying for a mortgage loan
When trying to select the best mortgage loan option, it’s important to learn that in order to get what you want, you have to look like you can actually get it.
Most aspiring homeowners want amazing rates that can be paid back in shorter times with incredibly low monthly payments, but they completely miss out on the whole part of actually getting their finances in check. If getting a sweet mortgage deal is on your agenda, here are the aspects of your finances that you have to look out for and what you have to do about them:
How to manage finances for large deposits and withdrawals
One of the most suspicious things for a mortgage lender to see in any applicant’s bank account are the tandem of huge deposits and even bigger withdrawals. In your eyes, it might seem like preparation for a rainy day, but in theirs, it might mean any of the following: something suspicious is going on, mommy and daddy are helping out, or a severe case of financial instability. Make sure that you don’t make a large down payment on a car or go on several shopping sprees six months to a year before applying for a mortgage loan, as the presence of big numbers going out of your account will tell a mortgage lender that you can’t handle your finances.
Assets and savings
Most people don’t realize this, but mortgage lenders will actually look at your assets and savings when calculating just how much they can lend you. Having a comfortable amount in your savings account or enjoying a few several assets will tell your mortgage lender that you’re more than capable of getting and paying a mortgage loan — an impression you’ll DEFINITELY want to make on your loan provider. With a better image in your mortgage lender’s eyes, you can rest assured, knowing that you’ll be getting the best rate possible in the long run.
How to manage finances in case of late payments and overdraft charges
This is the number one thing that mortgage lenders are going to look at when trying to determine just how much they can help you. It’s important to note that these lenders are actually investing in you and your home-owning dream when they hand you a mortgage loan, which entails them having to look at your last two to three month’s worth of bank statements. By determining how much of a risk you are to invest in when given a mortgage loan, they’ll get a good idea of whether or note you’ll be able to pay back on time (or at all). Remember — your reputation can be severely hampered if you have a history of late payments and overdraft fees.