Six Moves to Make Before You Apply for a Mortgage
Housing and mortgage deals are picking up in some areas of the country and interest rates are remaining low but have increased just a bit. There is a lot of hope for the real estate market in the near future as it seems like things are moving more towards normal again. One thing that we have learned from the recent years is that getting a mortgage is not something you can do on a whim and the same goes for lenders giving them. It takes a lot of research, verification, and honesty.
So what are the things you can do that will help you save time and money when you are applying for a mortgage?
There are some sites that you can use to check your credit score and history, it is very important to know your credit score. There are three main credit-reporting bureaus (Experian, Equifax, and TransUnion) that keep track of your credit and it is important to know your score from each one. Your credit score is what will help determine your mortgage interest rate since it says how good you have been with debt in the past.
If your score is not as good as you would like, or more importantly, as good as the lender wants it, then improve it. When you get your report, analyze it for errors; fixing these will improve your score. Other things you can do to improve your score include: not opening up new lines of credit, closing accounts, not making big purchases, paying off debts, and making payments on time.
Talk with some lenders and even a mortgage broker to see what will be expected of you during the mortgage process. If you are able to know this and what documents you will need, then you will save yourself a lot of time and headache.
The longer you give yourself to save for the down payment, the better you will be. If you can save for a large down payment (at least 20 percent), then you will save yourself money by not having to borrow as much.
Every lender has a debt-to-income ratio that must be met by the borrower to be approved. Your total monthly debts cannot exceed a certain percentage of your gross monthly income. You can pay some of these off and bump up your score and improve your DTI ratio.
Do not make huge purchases during the process, wait until you get your mortgage.
Housing and mortgage deals are picking up in some areas of the country and interest rates are remaining low but have increased just a bit. There is a lot of hope for the real estate market in the near future as it seems like things are moving more towards normal again. One thing that we have learned from the recent years is that getting a mortgage is not something you can do on a whim and the same goes for lenders giving them. It takes a lot of research, verification, and honesty.
So what are the things you can do that will help you save time and money when you are applying for a mortgage?
- Check your credit.
There are some sites that you can use to check your credit score and history, it is very important to know your credit score. There are three main credit-reporting bureaus (Experian, Equifax, and TransUnion) that keep track of your credit and it is important to know your score from each one. Your credit score is what will help determine your mortgage interest rate since it says how good you have been with debt in the past.
- Improve your score.
If your score is not as good as you would like, or more importantly, as good as the lender wants it, then improve it. When you get your report, analyze it for errors; fixing these will improve your score. Other things you can do to improve your score include: not opening up new lines of credit, closing accounts, not making big purchases, paying off debts, and making payments on time.
- Talk with some lenders and mortgage broker.
Talk with some lenders and even a mortgage broker to see what will be expected of you during the mortgage process. If you are able to know this and what documents you will need, then you will save yourself a lot of time and headache.
- Save for the down payment.
The longer you give yourself to save for the down payment, the better you will be. If you can save for a large down payment (at least 20 percent), then you will save yourself money by not having to borrow as much.
- Reduce debts.
Every lender has a debt-to-income ratio that must be met by the borrower to be approved. Your total monthly debts cannot exceed a certain percentage of your gross monthly income. You can pay some of these off and bump up your score and improve your DTI ratio.
- No huge purchases.
Do not make huge purchases during the process, wait until you get your mortgage.
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