Before you consider shopping for available houses, you must have a sound financial portfolio. A year or six months before you go house hunting, it would be prudent to have a look at your credit report. Carefully examine what your score is and what it means to your chances of securing homeownership. Lenders primarily use this report when determining who best qualifies for a mortgage. You must have attained a certain score to qualify for a mortgage.

What to do before and during a home purchase

Have enough finances

You should have a significant amount of money too. It is recommended that your budget should not exceed 2.5 times your annual gross salary. Take time to converse with lenders on what are the loan options available. In most cases, you will be forced to pick between fixed-rate loans which have fixed interest rates. Their repayment is similar to the life loans and can stretch up to 30 years. An adjustable mortgage rate, ARM, might have an initial fixed rate of interest which is adjustable within a given period.

Understand what lenders want

Most lenders will ask for a 20 percent down payment. If you are still unable to come up with that much cash, you may qualify for other special category loans. When ready to begin shopping, select a lender for preapproval. Preapproval and prequalification are entirely different. Prequalification is where the lenders’ cursory assessment provides details of the amount one can afford with their mortgage. Preapproval is solely based on the person’s actual income, debt records, and credit history.

Those operating under competitive markets might want to advance into pre-underwriting. Thoroughly reviewing all the documentation required to achieve a formal approval takes time. If you do this way ahead of schedule, it will better your chances of getting a …