6 Secrets for Successful Home Improvement Loan Applications
It has been said that a successful mortgage loan approval process is 1 percent perspiration and 99 percent preparation. These loans can be used to maintain or increase the value of your home. This can include general repairs, a new kitchen, a new bathroom, landscape improvements or even a swimming pool. Increasing the value of the property can increase the expected sales value of the home. Here are 6 secrets that will help you avoid problems when trying to obtain mortgage approval.
If you plan on buying a home in August or September, give yourself six to seven months to complete the loan process by starting in January.
Do Your Loan Homework
Know early on what type of mortgage loan you are applying for, and what costs you'll incur in the course of the application. Currently, fixed rate mortgages are said to be the best bet because they lock in a loan interest rate and your loan payments won't change over the course of a loan (usually 30 years, although 15-year loans, with higher monthly payments, and lower total debt, are also an option).
Check Your Credit
Few things are more important to banks and lenders than your credit rating. Keep your credit score in check by avoiding big credit care purchases before and while you are engaged in a mortgage application process. Banks and other lenders will find a bad credit score a determinant in awarding home loans. Taking on more debt could change your credit score, resulting in a potentially higher interest rate. Also, don't mess with your credit through closing day, such as making a big purchase.
Getting pre-qualified will put you a step or two ahead of the game for your home loan. This will give you a better idea of how much house you can afford, and a leg-up on getting a loan approval. Your potential lender will ask about your income, assets and credit. Just don't confuse pre-qualified with being pre-approved. The latter means you actually have a loan in hand, while being pre-qualified means you're in the game but haven't scored a loan yet.
Organize Your Documents
Getting your documents in order early is vital. Know how to get your hands on your purchase and sale agreement (copies are okay) and other "high priority" mortgage information such as estimated monthly information, estimated monthly payments, tax documents, pay stubs, and bank and investment statements. Be prepared to list previous residences, going back seven years. Any debt, such as credit card, automobile, student loans. Banks will be looking for outstanding balances, and they won't like it if you have more than 10 percent of your projected loan amount tied up in debt.
Do not overstate income or any investment assets. Likewise, do not underreport debts. Lenders will find out and will be quick to reject loan applications that aren't true.