Before applying for a mortgage loan...
Buying a home can be extremely stressful and the mortgage loan process can drive you insane! But the good news is that you can prepare yourself before you actually apply for a mortgage loan! You can be either a first-time homebuyer or a repeat buyer. If you do your homework, the whole loan process will go smoothly.
The first thing you should do is pull your credit report. We all know more or less what is on our credit report but sometimes we find ourselves wondering, "Where did that come from???" Or we had a moment of memory loss and forgot that we didn't pay a huge bill from a few years ago. Either way, knowing what your credit report contains can help you fix it so you can increase your credit score.
So what is a good credit score? And what score do I need to get approved for a mortage loan? Typically a good score can be a 670 or above but that doesn't neccesarily mean you are guaranteed an approval. But the higher your score the better your chances are at getting approved at a great rate.
Now that you have your credit report in hand, look at all your bills. Calculate your monthly payments and compare it against your gross monthly income to get a debt-to-income ratio. Every lender has their own guidelines as far as how much of your income can go towards monthly expenses. It's safe to say that your expenses should not go over 28% of your gross income. If it is higher than 28%, review your credit report and see what you can start paying off so that you can get your debt-to-income ratio below 28%.
The next thing you need to think about is closing costs. Are you prepared to pay all the loan fees involved when purchasing a home? Do you have enough to put money down? Many states offer down payment assistance but not everyone qualifies. The best thing you could do is to start saving. It also helps to research online and find out what fees are involved. Every state has it's own fees and charge. Below is what you are looking to pay if you purchase a $200k home in the state of Texas and as you can see it is very expensive.
Saving money is not only good to help you pay the closing costs. It also makes you look good. You are considered less of a risk if you have a savings with a good amount of money. So try to put money aside every month to help build that savings up and if you have any huge deposits, keep dcumentation of that becasue the lender will ask for it.
Lastly, be prepared to explain your spending habits! Lenders use your credit report to analyze the risk. They look at any inquiries and payment history. You can shop and you can inquire but the best thing you can do is to not spend as much and to not get new accounts especially if you plan on purchasing a home soon! Keep your credit card balance low! Try to save instead of spending so that you can make the process of getting a loan easier.
Now that you have done your homework, you can apply for a mortgage loan! It is always best to get pre-qulified so you can figure out what your price range is. You can shop around on your own for a bank or you can go to a mortgage broker like us to help you get a loan. Here at American Propert Financial, we match you with a lender that best suites your needs and we have access to lower rates than you would find on your own. We can help you with the whole process from beginning to end! So when you are ready to start the process towards buying your dream home, remember us at American Property Financial!