It requires a lot of planning and decision-making, from shopping around for the right lender to having enough money in the bank for a down payment. To make sure you have all your ducks in a row before beginning the mortgage application process, here are 10 things you should do first.
1. Check Your Credit Score: Obtaining copies of your credit reports is one of the first steps in the mortgage pre-qualification process. Checking your credit score helps you identify any unpaid loans or debts, as well as any errors that could be negatively affecting your score.
2. Improve Your Credit Score: If your credit score is below the average, it’s wise to take steps to improve it prior to applying for the loan. Paying off debt and disputing any inaccuracies on your report can help boost your credit score and may also result in better loan terms.
3. Review Your Credit Reports for Errors: As previously mentioned, errors on your credit report can hurt your chances of being accepted for a mortgage. Request a copy of your credit report and review it for accuracy.
4. Determine Your Budget: Gathering financial information is another important step in the home-buying process. You will need to be aware of your total income, total expenses, and total debt. With this information in hand, you can determine how much home you can afford and what size mortgage you’re eligible for.
5. Start Saving for a Down Payment: Having funds saved for a down payment is essential for getting approved for a mortgage. The more money you can put down, the better the terms of your loan will be. Aim to save between 5-20% of the value of the home.
6. Research Different Mortgage Options: It’s important to be aware of the different types of mortgages available so you can determine which option best suits your budget and needs. From fixed-rate to adjustable-rate mortgages, there are a variety of options to choose from.
7. Shop Around for Lenders: Look for a trusted lender who offers competitive interest rates and fees. Be sure to compare several lenders and negotiate for the best terms possible.
8. Get Pre-Approved: Once you have settled on a lender, you can get pre-approved for a mortgage. This is a formal way to determine your eligibility for a loan. It is also helpful for negotiating with sellers and real estate agents.
9. Review Your Finances: Prior to applying for the loan, review your finances to ensure that you still meet the standards of the lender. This includes having a certain level of income and assets, and proof of employment.
10. Gather Documentation: Before actually filing for a mortgage, make sure that you have all the necessary documentation ready. This includes documents such as your tax returns, pay stubs, bank statements, and W2 forms.
These are the ten things you should do before applying for a mortgage. By following these steps, you can ensure that your loan application is in order and you have a higher chance of getting approved. Additionally, you can save time when submitting the application and be better prepared overall.
This article was contributed on Jan 01, 2024