For first-time home buyers, the red tape and hoops you must jump through to get a mortgage loan can seem never-ending. Everyone you talk to has one or two things they wish they’d known before getting their first mortgage. First off, we are here to tell you that you can do this, it will end eventually, and yes, it is worth it.
If you’re just now joining the crowd of potential home buyers, we’ve collected various points of advice for you to consider before you get too much further into the process. If you’ve already started, let this serve as a helpful checklist to show you how well you’re doing already!
Buying a home is not a small feat by any means. Acquiring the funds–getting a mortgage loan–may seem like just a bunch of paperwork and signatures at first, but to the bank or loan company assisting you, it’s so much more. If you don’t have a long history of paying off credit dues, or if your track record shows other loans with unmet payment plans, it will be harder for you to get a loan. Every mortgage company or bank looks closely at that track record. If your credit score is lower than 500, most companies will either deny you or increase your interest rate by at least 2 percent. Ouch!
Before going further in the buying process, work on building your credit score so that mortgage companies look at you as a good candidate for a loan sufficient for buying the home of your dreams.
When applying for a mortgage loan, companies will put a lot of time into guaranteeing you are a financially-sound investment to take on as a client. As such, they will ask for tax documentation from multiple previous years, pay stubs, and bank statements. Do your homework ahead of time and come prepared with at least those three things. Most loan companies adopt the 28/36 rule when reviewing your financial history. Your monthly mortgage payment alone must not be more than 28% of your household’s gross income, and all of your debt must not exceed 36% of your gross income.
As such, make sure that you can properly explain and–if necessary–defend any out-of-the-ordinary payments or purchases within that documentation.
It may seem logical to get a mortgage loan only once you’ve picked out the house that you want to build your future in. However, your offer on a home is much more powerful when the seller enters negotiations if you have a pre-approval letter stating how much you are able to offer upon an agreement being drafted. It also assists you in confidently knowing what your parameters are when looking for a home. Lenders will only commit to loaning you an amount they’re comfortable with you taking responsibility for, and a pre-approval letter will tell you that amount.
Once these three steps are taken care of, you’re ready to start actively perusing the housing market! Keep in mind, though, that no one expects you to do this process alone, regardless of whether this is your first home-buying experience or not. A reliable, helpful, and informative agent such as Kim Clark in Kosciusko County can assist you every step of the way. Give her a call today!