Are You Ready To Apply For A Mortgage?
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.
Your credit report plays a crucial in role in whether you will get the home of your dreams. One of the first things you need to do is to get a copy of your credit report from each of the three major credit bureaus; Transunion, Equifax and Experian. Check your file thoroughly for any discrepancies and errors. If there are any inaccuracies you can dispute them via mail, phone or fax and this must be done with each of the three agencies separately. Also, take note of your Fico score. You want your score to be as high as possible. Delinquencies and derogatory accounts have a negative effect on your score. It's also a good idea 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 qualify for.
You will want to stay with the same employer for at least two years, preferably longer. Most lenders prefer that you have at least two years of employment history with the same employer. Lenders also like to see at least two years of employment within the same field and career because it shows a stable work history. Lenders will ask to see your employment pay check stubs and bank statements. If you are self-employed 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 financial statements.
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.
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.
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.
by: Jacqueline Star.
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