Mon, Nov 1, 2010
If you’re contemplating a new house in 2012, have you done your homework for snagging the best loan in the market? If answered no, what are you waiting for? A mortgage loan is a loan with a huge amount and you have to be watchful enough so that you don’t take the wrong decision that can make your finances go haywire. There are certain points that you need to take into account when you prepare yourself for taking out a home mortgage loan. Unless you understand the pros and cons of defaulting on your home loan, you can take wrong decisions that may lead to a foreclosure. Here are some vital essentials you should equip yourself with before taking out a mortgage loan.
• Did I check my credit score?
The first thing that you need to check is your credit score as this is the number that will be checked by the lenders before lending you a loan. If the credit score is low, the lender will consider you to be a risky borrower who can’t manage his finances and debt obligations. To reduce his risk, he may charge high interest rates on the secured loan. If you don’t want to be subject to high rates on the loan, you should improve your credit score before taking the plunge.
• Did I try to boost my monthly income?
The mortgage lender will check your total monthly income so as to make sure that you’ll be able to manage all the debt obligations that you owe in a particular month. If your monthly income is not enough for you to bear all the monthly debt obligations, you may either be turned down on the loan amount that you ask for or be charged high interest rates on the loan. Therefore, if you could boost your monthly income by looking for some passive income sources, you can easily make your way to a loan that is within your means.
• Did I repay my debt obligations on time to lower the DTI ratio?
Haven’t you heard about the importance of the DTI ratio or the debt-to-income ratio? This is the ratio between the amount of income that you earn and the total debt obligations that you owe your lenders. If you want to lower the interest rate on the home mortgage loan, you have to repay your unsecured debt obligations so that you can lower the DTI ratio and thereby directly affect your interest rates. You can save a lump sum amount every month if you can lower the rates on the loan.
Therefore, when you want to buy a new house with a financing option, you should take into account all the above mentioned points so that you may be able to take a measured decision with the secured loan. Also try to manage your monthly payments so that you can pay back the loan on time and thereby save your credit score from being badly hit.