Getting a mortgage is a complicated process but preparing beforehand will make the process less daunting and more relaxed. Vital steps in the preparation phase include; reviewing your credit reports for inaccuracies, establishing a solid employment history, budgeting your finances and putting away money towards a down payment.
One of the first steps towards homeownership is to obtain a copy of your credit report from each of the three major reporting agencies; Transunion, Equifax and Experian. Go through your reports thoroughly and check for any discrepancies and errors. If there are any inaccuracies you can dispute them and this must be done with each of the three agencies separately. Also, observe what your Fico score is. You want your score to be as high as possible. Derogatory accounts such as collections and charge-offs have a negative effect on your score. A good idea is to pay off a few of your current loans and debt as your debt-to income ratio is a factor which determines the type and how much of loan that you will be able to obtain.
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.
Find out how much house you can actually afford. 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 budget and figure out how much home you can afford. It’s always a good idea to purchase a home that you can easily afford instead of getting a more expensive home that will be a struggle for you to pay off.
Remember not to take out any large loans and make any large purchases in the months leading up to your mortgage application. That includes auto loans and student loans, either for yourself or your dependents. This will increase your debt-to-income ratio and you will have less funds available to apply towards your down payment and closing costs.
Taking these steps will increase the chances that you will be able to qualify for the home of your dreams.
Written by Jacqueline Star: Refinance, San Diego New Homes