Things to Do Before Applying for a Mortgage
1. Get Your Credit House in Order - buyers needs to do everything in their power to boost their credit before applying for a mortgage…
- Get Your Credit House in Order
Home buyers need to do everything in their power to boost their credit score before applying for a mortgage. This means paying down credit cards and making sure your credit is as squeaky clean as you can get it.
It's a good idea to check out your credit reports well in advance of applying for a loan to make sure there are no issues you need to address. You can pull reports from all three major bureaus for free at annualcreditreport.com. (Everyone whose income is going to be considered in qualifying for the loan needs to do this.) Source: Daily Finance
“Look at your monthly budget and figure out what level of payment you’re comfortable with, and how much of a mortgage you’re comfortable with,” says Polyana da Costa, a Senior Mortgage Analyst at Bankrate.com. “That’s very different from the lender telling you what you can qualify for. Just because you can get a $500,000 mortgage doesn’t mean you should get one.”
Money Under 30 has solid advice on how much house you can afford, as well as a home affordability calculator that can help you find a reasonable budget.
Before you get started down the mortgage path, take time to use this calculator, or one like it.
Our calculator gives you a ballpark of the mortgage payment and home value you can afford, but you’ll need to cushion for taxes and insurance which will add a few hundred dollars to your monthly payment.
And you’ll want to leave more of a cushion still. “Leave room for maintenance and for unexpected repairs, even if you’re buying a new home,” da Costa says. “You never know if you’ll need a new air conditioner or general maintenance. As a renter, you don’t think about those things; you just call the maintenance guy. But, as a homeowner, you have to find the money to fix it. It’s not a question of whether it will happen, because it will happen.” Source: Money Under 30
Yes, the word “homework” makes us shudder too, but this time the reward is much bigger than memorizing geometry theorems or the periodic table. You’re finding a home but you’re also making a financial commitment you’ll have to live with for years: get the best deal you can. Research loans, rates and brokers exhaustively before you sign or commit to anything. Doing the hard work now will pay off down the road with a better rate and terms. Source: TransUnion