Here are some tips to help you prepare to get a home loan.
Tip One – Save for a down payment/closing costs
While loan programs can vary, it is always important to have savings. While money down can vary greatly, there can be closing cost requirements even on zero down loans.
Even if you save more than you decide to put down, moving itself can be expensive, so save as much as you can. Worst case, you have extra money to put into furniture or future needs.
Tip Two – Assemble a budget
Now that you are saving, you also need to know and plan what your expenses are. At this point, the most important items you want to make sure to include are daily expenses. Track any coffee or meal purchases, grocery spending amounts and gas. Many of the items you will keep track of are not part of your debt on a mortgage application, but are vital to being able to continue to afford your lifestyle after you buy a home.
As you track these along with your fixed payments, you will need to begin researching costs for payments and utilities for the home you are looking to purchase. If you know anyone in the area that you are looking to purchase, they can be very helpful in projecting utilities like water, electricity, garbage, etc. Just remember that these are pieces of information and we recommend you over-estimate the costs as no one wants to buy a house and then realize they can’t afford everything.
Tip Three – Pull your own credit and score
Many buying options will depend on your credit score and if you are doing a joint application, both your scores will matter.
Do keep in mind that the score you pull yourself may not match the one your lender pulls as risk matrices can vary. Just make sure to look to correct any issues you have with your credit, if necessary. If you are unsure and you know who you are going to use as a mortgage loan officer, you can talk to them for hints.
You can receive one free copy of your credit report each year from each of the three major credit reporting agencies – Equifax, Experian, and TransUnion – however you will generally have to pay to get the score as well.
Tip Four – Begin browsing homes
While you are not quite ready to apply, it is always a good idea to start getting familiar with prices and options in the different parts of town. As we all know, the price to buy in the Willamette High School area is much more affordable than the Sheldon High School area, so if you need to close to a certain school or business area, it is important to know what you can afford.
Many times we shop for features over location, but with preferred locations.
Tip Five – Mortgage Calculators and Interest Rates
Now that you have begun browsing homes, the mortgage calculators are great helping you understand how much home you can afford. Except for taxes and insurance. Do not forget to look at these, as this can be a big factor in your payment. If you look for it, there are calculators that include this option.
It may be hard to estimate prices, if you aren’t looking at rates. We recommend estimating rate ranges, so don’t just look at the lowest rate, or you may be disappointed with your approval options.
Tip Six – Documents, documents, documents
When applying for a mortgage, your lender will need a documentation. While specfic document needs can vary, but having these documents ready to give the loan officer at the time of application, will speed up the process. At minimum, be prepared to provide your last two pay stubs, most recent W-2, last two years of tax returns, current and last months bank and brokerage statements.
Tip Seven – The mortgage loan person and pre-qualification
Whether it is the lender, seller, real estate agent, or friend, everyone will tell you that it is important to get pre-qualified.
This is important for you, as you want to make sure that you can buy the home you have been looking at online. If you have followed the tips, the mortgage pre-qualification process is fairly simple, although the who is not always that simple. Even if you know a mortgage loan person, make sure you trust them and that they have the experience to help you with all your options.
We all like to help friends, but a mortgage loan is not the time to help your friend with their first loan, especially if this is your first mortgage loan as well. There are usually many options, depending on your circumstances, and experience goes a long way.
Also, make sure that you can communicate well with the loan officer, as this process can also get stressful and you want to make sure you are working with someone that is working for you and thru any obstacles that may arise. This will usually occur after you have an accepted offer on a home.
To start the application, you will need to know the maximum amount you want to try and borrow. You will then fill out the application and provide your documents. Upon completion of the application and running your credit, your loan officer will go over your options with you.
Tip Eight – Quickly respond to any questions
There will probably be follow up paperwork, questions or signatures needed and it is important you respond quickly to these requests. Home loan applications are time sensitive and you do not want the application to expire or get denied due to lack of response time.
Tip Nine – No changes to your credit
Once you are pre-approved, you need to make zero changes to your credit. Lenders can and will usually pull your credit again before you close on your new loan. Changes to your credit, usually drop your score, so it is important to make zero changes during the process. This does not include payments, absolutely make all your payments on-time.
What we are referring to is new credit or inquiries. So if you are planning on buying a car or get new furniture, wait until your loan has closed before doing anything that would add debt or inquiries to your credit report.
As a note, if you are looking to buy items after your loan has closed, make sure you have already included these expenses in your original budget. Do not let your new furniture or vehicle prevent you from making your mortgage loan payment.