Is it time for you to move? Are you planning to buy a home soon?
If the answer is YES, to either of these questions, then this article full of tips is made for you.
One of the most popular questions I receive, when I have that initial consultation conversation with a client is, what can I do to have my finances ready so that I can obtain a mortgage to buy a home? If you’ve ever been in this position, you know first hand, that qualifying for a mortgage is an intricate process, more detailed now, than ever before. There are many factors which come into play when a mortgage lender looks at your finances and tells you how much mortgage you can reasonably afford. In fact, most of my customers tell me the most stressful part of buying a home is navigating through the mortgage process. Many people plan ahead when it comes to moving into a new home, so let’s capitalize on that time and look at a few steps you, as a consumer, can take to improve your financial portfolio and help qualify you for your next (or, first!) mortgage.
1. Talk to mortgage brokers.
Many buyers don’t take the time to get pre-qualified. They also often don’t take the time to shop around to find the best mortgage for their particular situation. Both are these are so important to the home buying process. I encourage my customers to meet with at least 2 or 3 mortgage brokers. Do this far in advance of purchasing your home, so that you will know exactly where your credit score is, if it needs improvement and how much home you can afford, and what the respective monthly payments will be. Don’t waste your time looking at homes that are out of your price range, this only creates heartache for you. Do ask plenty of questions of each broker and make sure you understand the home loan process completely. Ask each mortgage broker to pre-qualify you and to provide you an estimate of the loan costs. This is so you can compare quotes. Often times, customers choose a mortgage company based off of how well they are serviced and how their work ethics match up. You work side by side with these loan consultants for a number of weeks, having the same agenda is a key factor in any good relationship.
2. Prepare your credit.
Consider this: Improving your credit health could limit how much you’ll need to pay in interest and potentially save you thousands of dollars. (credit: Money US News) Know where your credit standing is, by asking your mortgage broker to provide you with the information or go online to receive a free credit report. Unless your credit score is 800 or above, you need to consider doing these steps to make an improvement. Review your credit report to ensure there are no discrepancies that you disagree with. If something on your report is incorrect, now is the time to contact the creditor and correct it. Pay off outstanding delinquent accounts. Avoid paying bills late and the consequence late payments.
3. Reduce your debt to income ratio.
You have two options to accomplish this. Increase your income (Side hustle, anyone? Time for a raise?) or reduce your debt payments. Start paying down your credit card bill(s) now! Do not apply for new credit lines anywhere until after you purchase and close on your new home.
4. Save money
Begin setting aside money NOW! Save your money so you have enough for a down payment. There are loan options of 96.5% up to even 100% loans, however, if you save and can put down at least 20% on the loan, you’ll be saving yourself a few hundred bucks each month of mortgage payment insurance. Plus, lenders look at borrower’s bank accounts and prefer the borrowers to have several months of payment reserves in the bank at the time of closing. This is beneficial to you in case a financial difficulty comes up after you close, you’ll have a money cushion to fall back on to continue paying your mortgage.
5. Find a trusted Real Estate Agent.
It’s absolutely vital that you seek out a trusted real estate professional who understands your goals and who will guide you through every step of the home buying process. Consult with them at any point in your home buying thought process. You’ll be glad you did!
For more great tips for your home, visit our Home & Lifestyle Blog!