Does the thought of applying for a mortgage give you the jitters? Mortgage rates have been rising steadily over the last few months, and it can be a little intimidating to begin applying for a home loan. After all, purchasing a home is one of the biggest financial decisions you’ll make in your lifetime (not that we’re trying to add to the pressure). However, if you go into the process with a little knowledge, then the whole thing will be much less scary. If you’re ready to apply for a mortgage, then here are four tips you should follow.
Get a copy of your credit report
One of the best things you can do to set yourself up for success when applying for a mortgage is to order your credit report. We recommend getting a copy of your report at least six months before you begin your search. This allows you to check your report for errors and have them corrected before applying. It also lets you know what your credit score is. Lenders will look closely at your credit history and score when determining if you qualify for a loan. The better they are, the more likely you’ll get a deal you like.
Get your paperwork together
Applying for a mortgage requires and generates a lot of paperwork. You will feel less stressed when applying if you get your paperwork together beforehand. Your lender will want to go over your finances with a fine-tooth comb. The types of documents that they will request include your bank statements and tax returns so they can get a good picture of your financial situation. Have them organized and easy to access before you apply.
Get smart about your options
As with any large purchase, you will want to shop around for the best deal. Different lenders offer different types of loans, each with its own rates and terms. Some homebuyers opt for a conventional loan which usually requires a down payment of at least 20 percent. But there are other options out there, especially if you don’t have that much saved for a down payment. Look into government-backed loans such as FHA loans, VA loans, and USDA loans as well. Shopping around could save you hundreds of dollars a month in payments.
Once you’ve gotten your credit report squared away, organized your paperwork, and explored your loan options, it’s time to get pre-approved. In today’s market, you must get pre-approved by your chosen mortgage services or lender before you shop for a home. Working with a mortgage broker and getting pre-approved gives you a clear picture of how much house you can afford. This saves you time and heartache by allowing you to focus your efforts on homes within your budget. Pre-approval also signals to a seller that you’re a serious buyer and you’re likely to make it to the closing table. While the housing market is shifting away from the extreme seller’s market of the pandemic, there is still competition from other buyers out there. Getting pre-approved will make your offer stand out.
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