I’ve been doing loans now for 10 years and I have figured out that the majority of people who have the most difficulty in the loan process have 5 things in common. Here’re some things to look out for BEFORE you apply for a loan.
- Know a bit of what your credit looks like – no one knows their exact score or exactly what’s on their credit report. It is however a good idea to know somewhat of what is on your report before it’s requested. A good place to start is www.annualcreditreport.com. You’re entitled to a free copy of your credit report each year. Get it and know what’s on your report before you apply.
- Clean up your credit – I’ve had borrowers that had outstanding late debt that they didn’t know was on their report. I’ve also had borrowers that didn’t realize someone else’s credit was on their report. If there is wrong or old debt on your report that needs to be fixed or paid off, do it before applying for a loan. Think of it as cleaning the house before company comes over.
- Save up some money – buying a house is a huge endeavor. It’s much more complex than buying a car or applying for a credit card. A lender is going to want to make sure that you can afford the purchase, plus afford the things in your life AFTER the loan closes. For example, if your car transmission blows right after you buy your house, can you afford to get that fixed plus still make your new house payment? A lender will want to see a little bit of padding in your account for life’s unexpected hiccups.
- If you’re a first time homebuyer, do a bit of research on the process – like I said this is much more complex than buying a car or getting a new credit card. There are many websites that have homebuyer education courses that you can take. Be educated about the biggest purchase you are making.
- Don’t be too over educated – I am by nature a control freak and I like to know every step in the process of any endevour I take on. However, there are times when I do have to trust the professionals. I can understand the nature of a root canal, but I also have to trust the dentist that he or she knows exactly what they are doing to finish the procedure. Not everything about a loan is listed in the education courses you may take. There are things lenders learn about how to get loans approved just by having the years experience behind them. Go with a lender that you trust to guide you through the process.