Five Steps to Take Before Applying for a Loan
Purchasing a property typically means applying for a loan. There are several steps to take before submitting your application to ensure approval and lower interest rates.
1. Check your credit scores and report history. Many lenders require a minimum credit score of around 600 for loan approval. There are free services you can use to monitor your score online. Higher credit scores typically mean lower interest rates, saving you money overall.
2. Pay down your debts. The lower your debt-to-income ratio is, the better. Less debt equals more affordability.
3. Prove a steady form of income. Lenders will require a proof of income. Tax forms, pay stubs and any other evidence of income will need to be provided.
4. Organize your assets or collateral. Secure documentation of your assets. This will help assure the lender you have money to spare or a cushion if circumstances change.
5. Avoid excessive spending. Put spending on hold in terms of large purchases. Again, the higher the credit score and lower the debt ratio, the better.
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Sources: forbes.com, thetruthaboutmortgage.com, investopedia.com