It’s less daunting to apply for a mortgage if you are fully prepared and know what to expect in advance. Applying for a home loan can be a time consuming endeavor and having everything in order can help to simplify a complicated process. Important steps in the preparation phase include; reviewing your credit reports for inaccuracies, building a solid employment history, making a personal financial plan and saving money.
First you will need to get a copy of your personal credit report from each of the three major reporting agencies; Transunion, Equifax and Experian. Check your file thoroughly for any discrepancies and errors. If there any accounts that are inaccurate you can dispute them and this must be done with each of the three agencies separately. Find out where you stand with your Fico score. You want your score to be as high as possible. Delinquencies and late payments accounts have a negative effect on your score. You might want to pay off a few of your existing loans and debt as your debt-to income ratio is factor which determines the type and amount of loan that you will be able to get.
It’s crucial to have longevity and stability employment wise. Most lenders prefer that you have at least two years of employment history with the same employer. Lenders also prefer to see at least two years of employment within the same field and career because it shows stability. Lenders will want to verify your employment pay check stubs and banking documents. If you are self-employed or own your own business you will need to provide documentation of your income with at least two years of W-2 documents and possibly proof of other assets and business documents.
Calculate the loan amount that you will be able to qualify for based on your income and other expenses. Keep in mind that you will also need to pay property taxes, utilities, homeowners insurance, maintenance costs and possibly private mortgage insurance (PMI). Work out a financial plan and figure out the loan amount you can afford. It’s a smart idea to downsize and purchase a home that you can easily afford instead of getting a higher priced home that will leave you struggling to pay it off.
It is vital not to take out any large loans, such as an auto loan for example, in the months leading up to your mortgage application. This will increase your debt-to-income ratio and you will have less funds available to apply towards your down payment and closing costs.
Preparing in advance and getting your finances and documents in order makes the home buying process much it easier. It will bring you one step closer to the home you have always desired.
Written by Jacqueline Star: Refinance, San Diego New Homes
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