Applying and getting a mortgage can seem like a mystery to some people. There are many individuals who wonder if they apply for a mortgage if they will get approved, how much interest they will pay and so forth. They have good reasoning to wonder, since preparation and understanding can help you get approved faster and get a better interest rate. Here are some things you need to know about getting a home loan before you buy a single family home.
1. Why Do Some People Get Denied?
There are many factors that go into why people are approved or denied a home loan, so it is hard to give just one reason. However, there are some reasons that are more common than others. The first is that the person is self-employed, or hasn't had enough time in their line of work. The lenders want to make sure that before they loan to someone that they have a steady job, and that their income is predictable. Someone who is self-employed may have an income that fluctuates or is hard to prove, so they might ask for yearly taxes and need to see at least two years worth before they will consider the person for a home loan.
Additionally, if you have just started a job and it is your first time in this given field or you have been unemployed for a long time, you might be asked to wait until you have a coupe years in this line of work before you will get a home loan. They need to see a good work history before they will loan to you.
Thus, if you are having a hard time getting approved for a loan, you should work on getting steady income, and a good work history.
2. What Determines My Interest Rate?
Another thing that many people want to know is how the lender will determine your interest rate. The interest rate will be calculated based on your credit score. The better your credit history, the less you will pay in interest. However, it does all fluctuate with the market. This means that even if you have the best credit score possible, if you buy when interest rates are high, you will still get a higher interest rate than someone who bought when rates were low, even if they have worse credit than you. So it is two fold, your credit score compared to the current market rates, are how they will calculate the interest you will pay each month.
By understanding these things you can better be prepared for your home loan.