Are all the headlines about “once-in-a-lifetime” mortgage rates tempting you to buy a house or refinance? Here are 8 steps you should take before you start the loan process and you’ll be ahead of the game! Getting a home loan
1. Start with your credit report
The first thing to do when you apply for a mortgage loan is to check your credit. You will want to make sure that your credit report is as accurate as possible and your scores are where you want them to be.
2. Get things in order
Check your credit report with your mortgage broker and correct any inaccuracies with the 3 major credit bureaus. This could take a month or longer so make sure to check your credit early on in the process. Pay particular attention to derogatory credit items to make sure they are reported correctly on the dates and balances. Remember, the higher your credit score the better the rate and the more loan programs you can qualify for. The lower the debt you have, the easier it is to qualify for a mortgage. If you are close to paying off a debt you may want to get it paid before applying for a loan to lower your debt to income ratio.
3. Gather your paperwork
You will need to provide documentation on your income and assets. You will need the last two years federal tax returns, all pages (and corporate returns if you are self-employed), w-2’s and 1099’s to match the income on the tax returns. You will also need to provide the most recent month of pay stubs and a phone number to verify employment. You will need to provide the last two months assets accounts and document any large deposits that are not payroll related.
4. Be realistic about what you can afford
Home ownership may be the American dream but don’t max out your purchase price of what you can afford.
5. Understand how lenders operate
Your credit score, on which lenders base much of their decision about your loan amounts and rates, is a reflection of their confidence in your ability to repay them. In a nutshell, the higher your credit score is, the easier it will be to get the amount and rate you want.
6. Decide how you’ll finance it
There are a few basic types of loans to choose from. Conventional, FHA, VA, USDA and Jumbo. There are several different down payment options on these loans as well. It is best to visit with your mortgage broker to go over the positives and negatives of each type of loan to see which will fit your situation best. You can also choose the term of loan, 30,25,20,15, and 10 year. There are also fixed and adjustable rate loans. This step is one of the most important decisions you will make in your financial future. You want to work with an experienced mortgage broker to help you make the right decision.
7. The larger your down payment, the wider your options
The more you put down, the better your rate will be. The days of zero down payments is gone (except for VA). Putting more money down up front will help ensure you pay less each month. Remember your down payment can be all your money, all a gift from a family member or a combination.
8. “Not now” doesn’t mean “never”
Home ownership is just not a realistic option for everyone right now. If you fall into this category, don’t despair. Your financial circumstances can change. When it comes to a major purchase like a home, timing is critical. If you can’t qualify today we can make a game plan to get you qualified in the future.
Contact me when you are about 90 days out from buying a home and we can make sure you are approved before you start house hunting. If you think you may have issues getting approved now, contact me and we can work up a plan to get you approved in the future.