Prepared Homebuyers Have A Strong Chance To Secure A Real Estate Loansby Brittany W. Content Writer
As the home of fortune 500 hundred companies and other upcoming small and large scale companies and start-ups, Denver has seen steady growth in its real estate demands in the last decade. This includes fulfilling housing needs for both residents and immigrants alike. Ever-increasing negotiations between aspiring homeowners and real estate brokers raise frequent enquires about real estate loans in Denver. A real estate loan is financing granted to an individual or a corporation to purchase a property. This financing or loan then gets paid back by the borrower to the financer basis the agreed interest rates, charges and terms. The process of applying for a real estate loan can be both time-consuming and complex but it is also secure and one of the least expensive ways to get financing for the desired property.
How well do you qualify for a real estate loan?
If owning your dream home requires securing a loan, you must be prepared for everything from budget to timeline. If you’ve figured-out the property you want to aspire to own, check these few steps to understand where you stand in terms qualifying for a loan for it.
1. Check your credit score
The most basic criteria to check your eligibility for qualifying for a loan is your credit score. You can find this three-digit value on your credit report. An individual’s credit score can be evaluated using several models, but the most common is FICO. FICO analyses your credit score based on a point system. This point system evaluates the credit score based on payment history, outstanding balances, length of credit history, types of accounts, credit inquiries. In this scoring system: (300 – 600) is a bad score; (600 – 649) is a poor score; (650 – 699) is fair; (700 to 749) is good; and (750 – 850) is an excellent score.
Even if you have a low credit score, you’re not automatically disqualified for a loan. However, several key factors of your loan, such as the loan amount, interest rate and certain key features, get impacted. Thus, irrespective of whether a loan if required immediately or not, aspiring homeowners are always trying to ensure that they keep up their credit score.
2. Audit your credit report
While it is not advised to pull-up your credit score frequently. But if you know well in advance about your plans to get a home loan, then pull-up your credit report to check your credit score and examine the report. In the credit report, understand what gave you a negative score and what improved the score. It can sometimes take weeks, months, and even years to observe a considerable rise in the credit score. Hence, you must plan this activity ahead of time before actually applying for a home loan.
If you’ve found the necessary steps to fix your credit score start following them immediately. You can also dispute any negative information on your credit score if it is disputable. Credit score disputes can be reported to the credit bureau and company that provided the information to the bureau. They are responsible for fixing any inaccuracies in the credit report as per the Fair Credit Reporting Act. While this is a time-consuming activity, you must follow it if the matter is disputable and you really can’t wait for the credit score to take its time to increase.
3. Clearing debt
Before sanctioning a loan, financing bodies always look at existing debts on an individual. In most cases, if the existing debts are more than one-third of the person’s salary, home loan applications are rejected. Housing costs are also taken into consideration in this calculation. Even other sources of debt like credit card bills, car payment, child support, student loans etc. are taken into consideration. You can enhance your chances to get a home loan by reducing the amount of money that you owe as a debt. Reducing debts and balances on credit cards or any other financial obligations help to free up credit, including the amount of money you can borrow.
4. Paying the home loan amount
Many homeowners first go and choose the home they desire rather than finding if their current financial and credit situation can secure a loan that will help them buy that property or not. Beyond this, many homeowners also don’t foresight their future financial conditions to analyze if they can pay the loan they are taking up. When they actually sit down and understand these finances, a lot of aspiring homeowners understand that renting an apartment would be a better option for them for the time being.
5. Employment history and income information
Financing firms check a homebuyer’s employment record and usually look for at least two years of association with a company. Exceptions can also be made basis factors like education, military service, or switching career fields.
Securing a real estate loan is also requires a check on the income statements of the homebuyer. This includes their income information, including pay stubs, tax returns, bank statements, brokerage statements, work contract and other documentation to verify their source of income.
Regular employment and income signify a reliable source of income that help the lenders determine the risk level of the loan which includes your capability to make monthly payments for your loan.
6. Property down payment
Homebuyers also need to pay a down payment for the property (that can be between 3 to 20 % of the loan amount) upfront. The loan gets sanctioned on the property cost remaining to be paid after deducting the down-payment. This is a pre-requisite for any loan.
Created on Oct 16th 2019 07:54. Viewed 683 times.