4 Pre-Mortgage Application Tips

Before you go to apply and receive your mortgage rates for your new home or refinance, there are some steps you can take to significantly increase your chances of getting a loan and/or getting a great loan with better rates and terms that you need:

1. Get your credit report: Before you apply for quotes on mortgage rates you should get a copy of your credit report from the three major credit reporting agencies: TransUnion, Equifax and Experian. This information is vitally important to the lenders in deciding everything about your mortgage so you should know it as well or better than they do. You can request a free copy of your credit report from all three credit reporting agencies (CRAs) once per year, and there's no better time to request that free report than right before you are considering a large loan for a home or a refinance that you will be paying for for decades to come.
2. Review and repair your credit: Once you've pulled your credit reports, you should review them to see what changes can be made to improve your credit score and rating well, before you apply for your mortgage quotes. There are small but effective actions you can take, such as paying down your credit cards or eliminating other small debts, like student loans, which can have a drastic effect on your credit rating. These moves will only serve to greatly increase the effectiveness of your negotiating ability when you are working to mold your mortgage rates to the terms that best suit you.
3. Know what loan options you want: To avoid applying for the wrong loan, you should know about the different loan types and what they mean. You should know the terms of the loan you are looking for as well as the repayment options. Do you want to be able to prepay your mortgage without penalty? How long do you want the loan term to be? 30 years? How about 15 or 50? Do you want the low start-up interest rate of an adjustable rate mortgage, or would you prefer the solid stability of a fixed rate? The more you know and are prepared to negotiate for, the smoother your loan process and closing will be.
4. Build up a good down payment: Your home's down payment will affect not only how much you have to pay each month over the life of the loan but it is also likely to affect what type of loan and the interest rate that is offered to you by the lender as well. A higher down payment means less risk to the lender, which is something they like to see.