WHAT TO DO BEFORE APPLYING FOR A MORTGAGE
1. Review your credit report. Order your free credit report through www.annualcreditreport.com and clear all outstanding debts, fees, etc. and remove any surprises before applying for a mortgage.
2. Increase your credit score. While job stability, income, existing debt, etc. all affect your ability to qualify for a mortgage, your FICO rating has the greatest impact on your purchasing power. Your credit rating can affect your interest rate and mortgage insurance. In most cases, the higher your credit rating, the better your rates. The ideal loan combination is two installment loans and three revolving accounts (credit cards, lines of credit) with balances less than 30% of the high credit limit. If you are paying any bills, please do not close them. Over 50% of your credit score is based on your payment history and the length of your payment history, but only on open accounts.
3. Collect the documents. This is the perfect time to start collecting all the items your lender will need to apply for a loan. Some loan products may not require all of these documents, so it is recommended that you meet with your lender. The most common documents required when applying for a loan include:
– Last 30 days of pay stubs (in a row)
– W-2 in the last 2 years
– Tax Returns – With all pages from the last 2 years (for federal tax returns only), this will be required if you are self-employed and require both personal and business records (if applicable).
– Bank statement – last 2 months or where will the funds for the initial deposit and closure come from?
– Divorce decree and child support documents (if applicable)
4. Funds to be closed. There are many payment options available with a low down payment. It is important for potential home buyers to know that they probably won’t need a 20% down payment, but they need to do their homework to understand the options available. There are programs that allow qualified buyers to purchase a home with a down payment of 3.5%. There are even options like VA loans and USDA loans, with no down payment requirements for qualified applicants.
5. Get prior approval. Stand out as a serious buyer and understand what you can afford.
6. Find a real estate agent. Talk to a local professional who will guide you through the process.
WHAT TO AVOID AFTER MAKING A MORTGAGE
Consistency is the main thing in the game after applying for a mortgage. Be sure to discuss any changes in income, assets, or credit with your lender so as not to jeopardize your application.
1. Don’t change bank accounts.
2. Do not apply for a new loan or close credit accounts.
3. Don’t make big purchases.
4. Do not put cash in your bank accounts before talking to your bank or lender.
5. Don’t sign other loans for anyone. Always fully disclose and discuss your intentions with the lender before taking any financial action. As always, I am ready to answer any questions you may have when applying for your first mortgage loan.
Branch Director, NMLS No. 1721861
Cherry Creek Mortgage, LLC, NMLS 3001