Buying a new home can be a stressful and overwhelming experience, especially when you consider how much time and money you’re investing into the process. Your realtor will be a helpful guide along the way, holding your hand through the process of making an offer, getting the home inspected, and even applying for a mortgage. They may direct you to a mortgage broker they trust and work with often, but you may want to shop around to make sure you’re getting the best deal possible. Before applying for a mortgage, do your research and consider some of these factors before sealing the deal.
Understand your finances
When you apply for a mortgage, you will need a lot of documents on hand to prove you can afford your mortgage, such as pay stubs and tax filings. Be ready to prove how much money you make and explain for other sources of income or lump sums that may be gifted to you to help pay for your home. If you’re being given a large sum of money to put down as a deposit or put toward your mortgage payments, there may be some steps in making sure your lender knows where the money is coming from and that it’s secure. Get together as much as you can to help make the case that you are a trustworthy lendee and that you’re in a good financial position to purchase a property.
Also, make sure you’re taking on a mortgage you can handle. Typically, your mortgage payments monthly should be no more than 28% of your monthly gross income. Know what you need to make and how much you’ll need to spend before jumping into a mortgage you may be unable to afford.
Work on your credit score
A huge factor in determining whether you’re eligible for a mortgage will be your credit score. If you have great credit, you’re already set, but there are things you can do to raise it over the next few months or years before applying for a mortgage. Start early by paying off as many balances as you can, disputing any issues you night find, and don’t to any hard credit inquiries that might lower your score right before you apply. You can take a look at your credit rates regularly using a soft inquiry to keep track of your progress using a service such as Credit Karma, which won’t lower your credit score. If you find your credit score to be undesirable at best, you may want to have a cosigner, or remove a cosigner from the mortgage, if that makes the most sense. This may be able to get you a larger amount or lower interest rates.
Know your market
Your real estate agent should be able to help you best with this step, but understanding where you’re purchasing property is important before you apply for a mortgage. Lenders may have different policies based on what state your purchasing property in, and it may even vary from city to city. If you’re looking at Columbus homes for sale, you may find different qualifications than when applying for a mortgage to purchase a home in Fort Lauderdale. Understand the market in which you are buying before jumping into the process of applying for a mortgage, whether it is your first or your fifth time doing so.
