How to Financially Prepare for Your Housing Loan Application

Man holding replica house

Taking a housing loan is a long-term commitment. The specter of foreclosure should suffice to plan your finances to avoid losing your would-be home. To ensure you’re financially ready for the responsibilities that come with homeownership, most Lancaster New City reviews would advise you to do the following:

Look at Your Budget Before Looking at Properties

The maximum loanable amount would mostly be based on your income. Many lenders have home loan calculators that determine how much you can borrow with your current earnings. A good rule of thumb is to set aside 28% of your gross monthly income to mortgage payments.

Know Your Credit History

As a borrower, you must know your creditworthiness because it would most likely affect the interest rates you could qualify for. Don’t let the lender tell you how creditworthy you are; you ought to know this yourself. Secure a copy of your credit report to know your credit history. This way, you can correct any negative record when there are errors with its submitting entity, like your bank or credit card company.

Save at Least 20% of the Property’s Selling Price

Lenders give an 80% margin of finance. In other words, there’s a good chance you can only borrow four-fifths of the property’s total selling price, and pay the one-fifth out of your pocket upfront.

Although you can pay the down payment in installments, the first one, which is the reservation fee, is usually non-refundable. If you don’t have the full down payment ready before you buy the house, you might lose the property you want to another buy without getting your initial payment back.

Come Up with Three Months’ Worth of Monthly Payment

Even if you have the most stable job in the world, there’s no guarantee you wouldn’t lose down the road. Considering the uncertainty of the future, it pays to save up three months’ worth of mortgage payments (or more) before actually buying the house. In case anything happens that might affect your capacity to pay for some time, you wouldn’t default on your loan.

Applying for a mortgage makes it convenient to own a house, but it’s no excuse to plan without foresight. Take your time to be financially ready to obtain the most favorable deal and be a responsible housing loan borrower.