Applying for your first loan can be an exciting and anxious moment. The answer you get from your bank could decide if you get that home you want, or if you are able to buy the car you need to get back and forth to work. Before you apply for that loan, there are a few things you need to know first.
Work On Your Debt Ratio
Your debt ratio is a financial indicator that measures your monthly debt against your monthly income. The banks will apply a percentage to your debt ratio, and they like that percentage to be around 45 percent or better. That means that you are only using 45 percent of your income to cover your monthly financial obligations.
Fix Your Credit Report
Did you know that your credit profile lists previous addresses that are for places where you never lived? Your credit profiles from the three main credit reporting agencies (Trans Union, Experian, and Equifax) are the primary sources of information for your potential lender. Federal law states that you are to get one free and full credit report from each agency every 12 months. Take advantage of that law and make sure that your credit report is accurate. If it is not, then use the dispute process to make repairs.
Check on the internet to see what the going interest rates are for the kind of loan you are looking for. Don’t go with the first place you see, or don’t just choose the lender that your family uses or that your buddy used for his first loan. You may need to find a deal that is more specific to you. For example, some sites like LowVARates.com offer good options if you are just returning from deployment and need low VA rates. Make sure you do yourself a favor in the beginning by finding the best deal for you personally, not just the first place you see.
Have A Down Payment Ready
You could try and apply for your first loan without a down payment, but you will be making things much more difficult on yourself if you do. Always try to have at least 10 percent of the purchase price ready as a down payment on any loan you are applying for.
Have Your Financials Ready
The bank is going to want to see information for you savings and checking accounts, your tax filings and your past several paycheck stubs. The smartest thing you can do is put together a folder with all of the information your bank will need and have it ready when you meet with the bank office.
If you want to increase your chances of getting a positive answer to that first loan application, then you need to prepare yourself in advance. The more prepared you can be, the more impressed the bank will be and you will increase your chances of getting your loan.