Getting Started
Start early
Buying a home is not like buying a TV or a dish washer. You probably won’t use cash and your credit card won’t do the trick either. Purchasing a home requires an in depth underwriting process to qualify for and obtain a mortgage loan. It is likely the largest purchase you will ever make. You want to start early so you are educated, confident, and prepared to buy the home of your dreams.
Start A Pre-Approval Prep File
Your lender will likely need a number of your financial documents in order to issue a pre-approval and later underwrite your loan. You should create a Pre-Approval Prep File that contains paper or digital copies of all of your important financial documents, which might include: paystubs, W2s, 1099s, tax returns, bank statements, retirement statements, investment statements, etc. Preparing this file of documents early will help make the process easier and smoother.
Know Your Credit Scores
Your credit scores and credit report plays a large role in your ability to qualify for a mortgage loan. The credit scores can also impact the interest rate you will qualify for. Generally, the higher your credit scores the lower your interest rate.
Your lender will order a tri-merge credit report which provides your credit information from all three credit reporting bureaus. Credit scores range between 300 and 850. A 620 will allow you access to most loan products. A 780 and above is considered premium and will give you access to all products and the lowest interest rates. A higher credit score might help a borrower qualify with a lower down payment. And importantly, the higher your score the lower your interest rate.
Below you will find the contact information for the 3 major credit reporting agencies to help you determine your credit rating. The earlier you begin your pre-approval process the more time you will have and the better chance you’ll have to take steps that might improve your credit position and credit score. Ask your lender how to improve your credit score if you need to. And going forward, treat your credit like gold.
| Equifax | http://www.equifax.com | 800.685.1111 |
| Experian | http://www.experian.com | 800.392.1122 |
| Trans Union | http://www.transunion.com | 800.888.4213 |
Savings
If you are buying real estate, begin saving funds now to use towards your down payment, closing funds (appraisal, miscellaneous fees, escrow, title insurance, etc.) and expenses such as inspections. The more you save the more money you’ll have available and the more home you’ll be able to buy.
Maintain The Status Quo
Now is not a good time to change careers, move your money around, or buy big ticket items. Lenders like stability. So if you are considering any major changes, it pays to discuss those plans and consult with your lender about how to proceed before you do! Talk with your lender before you use available cash to pay off other debt such as credit cards and before you buy or finance a big ticket item. Consider the following: A $500 a month debt payment (such as auto loan payment) could lower the amount of loan you qualify for by about $83,000! * * Based on a 30 year mortgage at 6% interest.
