Get your dream house – Get a mortgage

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In order to buy a house on your own you have to get out a mortgage. But even before you start talking with various lenders about the rates they are willing to offer or the kind of mortgage that you want to take according to your convenience, there are other things that you have to attend to make sure that you are prepared to take out a mortgage. Here are some steps that you have to follow before you are ready to start your hunt for an appropriate mortgage loan.

  1. Become debt free – It is important that you pay off most of your debts before you apply for a mortgage. This is because most lenders are friendlier to applicants who have little or no debts. This is because if they don’t have other financial obligations to fulfill, they are low risk borrower. Thus clearing your debts will not only provide you a better chance to borrow but also you can borrow for a greater amount. Most lenders have affordability criteria which is the debt-to-income ratio. This is the ratio of your monthly income to your total debt obligation. You are not eligible if this value is beyond a certain amount.
  2. Save up as much as you can – Once you have cleared your debts you should start saving as much as possible. This is because even with the cleanest of credit records you won’t get the whole amount of the price of your house as mortgage. With the way the loan process works today, you need to make at least 20% down payment of the value of the house for security purposes. You can even get mortgages with 10% down payment but the interest rates you have to pay are higher and your mortgage would become costlier. Thus in order to buy a good house start saving up so that you can accumulate the money required for down payment.
  3. Start filing records – Mortgage lenders would give you extra preference if they see that your financial record is very clean and you pay bills on time. Thus you should start paying all your bills on time and not incur further debt from the time you decide that you are going to buy a house. Also, if you have a steady income then you become more appealing to the mortgage lender as you become less risk prone. Thus you should start filing all your bank statements and play slips to show the mortgage lender. If you are self employed then make as many yearly accounts as you can and get them assembled by an accountant of reputation.
  4. Refresh your credit – Your credit score is very important for all lenders. You should draw out a credit report from any of the major credit bureaus and go through it. If you see any negative items that are incorrect then you should immediate write a letter to the credit bureau to have the item removed. In this way your credit score will increase.

Now you are ready for a mortgage.

Author's Bio: Marie Lewis is a financial advisor for EasyFinance.com. She brings an unique perspective on personal finance, frugality and all kinds of consumer financial products and services.

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