Home Finance Mortgage Loan 101: Essential Things You Should Know To Get Approved
Finance - July 18, 2019

Mortgage Loan 101: Essential Things You Should Know To Get Approved

Acquiring a home is one of the essential decisions you can make as a person. You might find it hard to acquire one especially if you don’t have enough funds to buy one, but there are lots of mortgage loan program that can help you buy the house you have been dreaming of.

The most common mortgage loan that is known to many is the FHA loan where every US citizen will get assistance from the government to get a loan with a very low downpayment as low as 3.5 percent. If you are in the military service or you have a family working in the military, you can also apply for a Veterans affairs Loan (VA Loan) from VA Loan Plano.

The advantage of this type of loan from VA Loan Plano is that they can offer you 100 percent financing, thus saves you a tremendous amount of money from downpayment. The third type of government-insured home loan is the United States Department of Agriculture (USDA) loan.

On the other hand, a conventional home loan is not insured by the government but offers no upfront insurance premium payments since they usually require at least 20 percent down payment.

In case you had decided to apply to any of the mortgage loans mentioned earlier, we have listed essential things below that you should know for you to get a high chance of getting approved.

Build a Good Credit Score

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It is essential that you should have an excellent credit score. While government-insured mortgage loans do not usually require a high credit score, building up good credit is still advantageous, especially if you are aiming for lower interest rates. So before applying, make sure you have at least a credit score of 680. Also, make sure to check your credit history and correct any errors since most lenders will also take a closer look at your credit history.

Aim for a 20% Downpayment

Even if you plan to apply for a government-insured loan such as FHA, you should still aim to pay your lenders a 20 percent upfront downpayment instead of paying 3.5 percent. The reason for this is so that you can avoid paying a Private Mortgage Insurance (PMI) since it will only become an added cost to your monthly dues. PMI protects the lender, not the borrower in case the borrower failed to pay his or her monthly dues.

Buy Within Your Capability

As an aspiring homeowner, you should also consider only to buy a house within your means and avoid purchasing a home that you know you can’t afford. A lot of homebuyers make that mistake by maxing out the loanable amount based on their DTI or Debt To Income ratio. With this, lots of them failed to pay their monthly dues, especially if they encounter unexpected expenses.

Maintain a Stable Job

When applying to any mortgage loan, make sure that you have a stable job and you stayed with a company for at least two years. Also, avoid changing jobs when your mortgage loan application process is ongoing.

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