Preparing For A Hawaii Mortgage Loan

Planning Ahead for the Home Buying Process.

Various mortgage qualification criteria will determine if you can get the home loan you desire. Here are tips on how to prepare so you will be able to get a mortgage loan.

1) Check Your Credit Score

You are allowed one free credit report per year from each of the three companies that maintain credit reports – Experian, TransUnion and Equifax. Check AnnualCreditReport.com, a website jointly owned by these companies, and get your annual complimentary copy of your credit report.

• Make sure all three credit reports are accurate and that all past due debt is paid. Check your report closely for errors and be aware of any potential fraud (e.g., identity theft).
• Do everything possible to maintain a high credit score because not only will it help you qualify for a loan, it will also be used in determining your interest rate. A lower interest rate results in smaller monthly mortgage payments.
• If your credit score is bad, work on improving it. There are many resources online that will help you do this. However, beware of unscrupulous companies that offer to improve your score because they are likely scams. You can only fix mistakes on your credit report – you cannot undo your own past mistakes.

2) Reduce Your Debt

Get rid of credit card debt. This improves your debt-to-income ratio as well as your utilization ratio because you are using less of your available credit line. This will help your credit score.

3) Save Money

Saving money will benefit you in several ways. You will need money for a down payment and also for various costs associated with home buying, including the loan’s closing costs. To get the best interest rates, a borrower needs to have a substantial down payment, and there will likely be restrictions on how much of the down payment can be borrowed.

4) Determine Your Home Buying Budget

Analyze your financial situation and be realistic about your budget. Do this before talking to any lenders.

5) Find a Lender and Investigate Loan Options

Ask co-workers, friends, and family for referrals. Ask local real estate agents who they recommend. Also look for reputable lenders online to compare rates. Some companies can save you time by getting offers from multiple lenders at the same time. Also, be sure to research the various types of mortgage loans offered by lenders.

6) Consider Both Fixed-Rate Mortgage Loans (FRM) and Adjustable Rate Mortgage Loans (ARM)

Understand the advantages and disadvantages of each. With a fixed-rate loan the monthly payments will remain the same, while the payments on an adjustable-rate loan are subject to change.

7) Get a Good Faith Estimate of Closing Costs From Your Lender

Your lender is required by law to provide you this statement within three days of receiving the loan application. Also inquire about the terms of the loan and any special information you should know, such as prepayment penalties.

8) Stay Within Your Financial Means

Only you can realistically determine your own budget and how much you will be able to pay each month. Mortgage lenders will inform you what amount of loan you qualify for, but don’t let the mortgage lender determine how much you borrow – that is your decision. First time home buyers may qualify for lower interest rates or lower down payment requirements. Check with your county housing department, your employer, mortgage brokers, and online mortgage companies to see what programs may be available.

9) Choose A Loan

Pick a loan that best fits your particular circumstances. When you receive the final loan papers about one week before closing, make sure they match the original terms agreed upon. If you find a home you like and want to make an offer, have your mortgage broker/lender write a Pre-Qualification letter for only the amount of the offer so the seller is unaware if you can afford more.