If you’re in the market for a new home, you likely are also in the market for a new home loan.
Ideally, you’d want to get a home loan with the best terms possible. But to achieve this, you’ll likely need to put a little work into ensuring all of your financial ducks are in a row. To help you see how this can be done, here are three factors that determine the terms of your home loan and how to improve them.
How Your Credit Looks
One of the first things that lenders will take a look at before determining if they’ll lend you money for your mortgage is your credit. If you have bad credit, you can expect to either be denied a mortgage loan or to have less than ideal terms for your loan. Knowing this, it’s worth it to get your credit in the best possible shape before applying for a home loan.
To do this, Nicole Shea, a contributor to the Consumer Financial Protection Bureau, recommends that you get a copy of your credit report so you can see what areas you can or should improve. In some instances, you might simply need to spend some time paying down any outstanding debts that you have to boost your credit score. At the very least, you should commit to making on-time payments so that you can prove that you’re a good credit risk.
Your Previous Employment History
Another thing that you lenders will look at when approving a home loan application and setting the terms is what your previous employment history looks like.
Ideally, Liz Smith, a contributor to SmartAssets.com, shares that you should try to remain at the same job or at least bringing home a steady income for a while before you try to get a home loan. Otherwise, it may be harder for a lender to see evidence that you’ll be able to pay your loan back in full. And when this happens, the increased risk they take on could mean worse terms for your home loan.
What You’re Using For A Down Payment
If you don’t have the best credit and you haven’t been at your current job for very long, one thing you can do that will help you get better terms for a home loan is to have a decent down payment that you’re putting toward your home.
According to Sean Williams, a contributor to the Motley Fool, shares that the more money you’re willing to put toward the home, the less money you’ll be asking for for the home loan and the more responsibility you’ll have toward ensuring that you don’t lose the house. All of these things combined make a sweeter deal for your lender, which means you could qualify for much better terms on your loan.
If you’re going to be applying for a home loan soon, consider when your lender will be looking at as they set the terms for your mortgage and how you can turn things more in your favor.
